BASF SE joined other chemical makers in cutting its expectations for the year, blaming subdued global industrial output and slow demand for consumer products.
(Bloomberg) — BASF SE joined other chemical makers in cutting its expectations for the year, blaming subdued global industrial output and slow demand for consumer products.
The German company now sees earnings before interest and taxes of as much as €4.4 billion ($4.9 billion), down from a previous goal of as much as €5.4 billion, it said late Wednesday. Peers Lanxess AG and Evonik Industries AG had previously warned of a worsening outlook, also citing a lack of economic recovery.
The shares declined as much as 2.3% in early Thursday trading in Frankfurt.
The dialed-back expectations add to investor concern that economies around the world are struggling, weighed down by higher interest rates and a slow recovery in China. While services demand has helped boost gross domestic product in the first half of 2023, growth in industrial production continued to slow, BASF said.
The company also reported preliminary second-quarter earnings before special items, which slumped 57% to €1 billion compared to a year ago following “considerably” lower prices and volumes.
Read more: It Feels Like ‘Lehman II’ in This Crucial Industry: Chris Bryant
After BASF fell in line with other profit warnings across the industry, investors are now likely to focus on the company’s ability to pay a dividend while also spending to expand its business, Morgen Stanley analyst Charles L Webb said in a note.
BASF’s customers, which include the automotive and agricultural sectors, have reduced their chemical inventories, the company said. But any recovery during the second half will be tentative at best because demand for consumer goods “will be lower than previously assumed,” leaving margins under pressure.
Earlier Wednesday, automotive supplier Continental AG reported worse-than-expected operating earnings in the second quarter after high expenses for logistics weighed on its automotive division.
(Updates with share move in third, analyst comment in sixth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.