The macroeconomic environment became challenging for BASF in the second quarter of 2019. “There is currently high uncertainty, low visibility and poor predictability,” said Dr. Martin Brudermüller, chairman of the Board of Executive Directors of BASF SE, during a conference call. “Our second-quarter results clearly reflect this.”
Compared with the second quarter of the previous year, sales decreased by 4% to €15.2 billion. Prices were down by 2%, mainly driven by the isocyanates and cracker products businesses. Sales volumes declined by 6%.
All segments recorded lower volumes, except for Nutrition & Care. The decline was most pronounced in the Chemicals and Agricultural Solutions segments.
EBITDA before special items decreased by 27% to €2 billion. EBIT before special items came in at €1 billion, 47% lower than in the prior-year period.
The global trade conflicts, particularly between the US and China, are a serious concern for the company.
“We followed the general assessment that a solution would be found by the middle of the year. But now it seems the situation will not ease for some time,” said Brudermüller. “Unfortunately, many of these did not materialize and we therefore had to lower our outlook.” said Brudermüller.
Dr. Hans-Ulrich Engel, CFO of BASF SE, discussed the second-quarter figures. As in the entire first half of 2019, earnings in the second quarter of 2019 were significantly negatively impacted by the lower volumes and margins in the Chemicals and Materials segments. “In total, the two segments accounted for 83% of the overall earnings decline in the second quarter of 2019,” Engel said.
Net income amounted to €6.5 billion, compared with €1.5 billion in the second quarter of 2018. Reported earnings per share increased from €1.61 to €7.03 in the second quarter of 2019. This was due to the book gain from the deconsolidation of Wintershall following the closing of the merger of Wintershall and DEA.
The cash flows from operating activities came in at €1.9 billion, compared with €2.2 billion in the second quarter of 2018. The free cash flow decreased by 31% to €965 million.
“The global economic risks have increased significantly during recent months,” said Brudermüller. “This has been driven by geopolitical developments and the ongoing trade conflicts between the United States and its trading partners. These conflicts will not be resolved in the near future and are causing a noticeable slowdown in macroeconomic growth around the world, particularly in China.”