DThanks to price increases and the weak euro, the chemical group BASF made more business and profits in the second quarter than experts thought. In view of the uncertain economic environment, however, management did not dare to make any changes to the annual targets. The share was down 2.4 percent on Tuesday morning, significantly worse than the weak Dax.
According to preliminary calculations, sales in the second quarter increased by 16 percent year-on-year to almost 23 billion euros, as the Dax group surprisingly announced on Monday evening in Ludwigshafen. However, the quantities fell slightly compared to the same quarter of the previous year.
Earnings before interest and taxes (adjusted EBIT), adjusted for special effects, fell by almost one percent to 2.34 billion euros, but were far better than analysts had previously estimated. On average, they had only expected an operating result of just under 2.1 billion euros. Increased prices for raw materials and energy could have largely been passed on through higher sales prices, according to BASF.
More income from Wintershall
Broken down by segment, the company performed better than expected in all areas – with the exception of the Nutrition and Care division, under which BASF offers, among other things, flavors and certain ingredients for the food and pharmaceutical industries. Analyst Georgina Fraser from the US investment bank Goldman Sachs was disappointed with the performance of the area. She criticized that the positive surprise in the results was massively influenced by the “Other Businesses” section.
The bottom line is that BASF earned almost 2.1 billion euros, a good quarter more than a year earlier, mainly thanks to a higher investment result from the gas and oil production subsidiary Wintershall Dea.
The well-known annual forecast remained “for the time being” unchanged, as the company further announced. So far, BASF is aiming for a drop in sales to 74 to 77 billion euros for 2022. At 6.6 to 7.2 billion euros, the operating result is also likely to be lower than in the previous year. In 2021, sales had climbed by a third year-on-year to 78.6 billion euros. Significantly higher sales prices and volumes contributed to this. BASF was able to more than double the adjusted operating result (adjusted EBIT) to 7.8 billion euros.
The Baader Bank had previously doubted a forecast increase due to the uncertain environment. However, the company could make up for this when presenting the detailed half-year results, emphasized analyst Markus Mayer on Tuesday. Higher goals depend on whether or not Russia actually continues to supply gas after the scheduled maintenance work on the Baltic Sea pipeline Nord Stream 1 – and how the corona situation in China develops.
Jefferies expert Chris Counihan reacted similarly: The uncertainties for the second half of the year remained significantly high, a statement on the further course of the year and thus possible changes in the outlook should only follow at the quarterly presentation – and thus after the end of the maintenance work – stated the industry expert.
Chetan Udeshi of US bank JP Morgan goes one step further and expects the signals from the chemical industry to be more gloomy for the second half of the year and 2023 given the gas supply risks and the weak economy. He slashed his estimates for 2023 adjusted earnings per share for the sector by an average of 28 percent. However, BASF would cope particularly well with possible production cuts in the industry with increasing pricing power. In addition, Udeshi pointed to an attractive valuation. The Ludwigshafen-based company intends to present detailed quarterly results on July 27th.