German chemicals giant BASF SE has reported a 17 percent decline in profit on a 2 percent jump in sales for fiscal 2018.
While income rose to 62.7 billion euroslast year, earnings (EBIT before special items) fell from to €6.4 billion from €7.6 billion in 2017.
BASF attributed the decline primarily to the performance of its chemicals segment, which accounted for around two-thirds of the overall decline in earnings.
Isocyanate margins fell sharply in the second half of the year. Cracker margins in 2018 were also lower than expected in all regions.
“All in all, 2018 was a year marked by difficult global economic and geopolitical developments and burdened by trade conflicts. In the second half of the year, BASF felt an economic slowdown in key markets, especially in the automotive industry, the largest BASF customer industry,” the Ludwigshafen-based chemicals supplier said Feb. 26.
More importantly, BASF noted a ‘significant drop' in demand from Chinese customers, fueled by trade dispute between the United States and China.
"We accept these challenges. With our new corporate strategy, we will use 2019 as a transitional year to emerge strengthened, "said BASF CEO Martin Brudermüller.
Volumes fell at performance products segment, which includes the company's plastics operation. Chemicals' volumes also dropped during last year, due in part to the low water level of the Rhine.
“The exceptionally long low water level of the Rhine has also bothered BASF. The supply of raw materials in Ludwigshafen by ship almost came to a halt over much of the third and fourth quarters,” the company noted.
As a result, BASF had to reduce its capacity utilization in Ludwigshafen. This burdened the result for 2018 with around €250 million.