BASF profitability declines 24 percent amid market upheavals 

Global trade conflicts and uncertainties related to Brexit are bedeviling on BASF Group, which has reported a decline both in sales and profitability in the third quarter of 2019 and expects a sharp 30 percent drop in EBIT for the full year.
 
Sales in the third quarter declined 2 percent year-on-year to 15.2 billion euros ($17 billion) while income from operations (EBIT) before special items fell 24 percent to 1.1 billion euros ($1.2 million) over the three months to end of September.
 
The company’s earnings (EBITDA) improved slightly, reaching 2.3 billion euros ($2.6 billion), compared with 2.2 billion euros ($2.4 billion) in the third quarter of 2018. EBITDA before special items was down by 8 percent to 2.1 billion ($2.3 billion).
 
BASF attributed the decline mainly to lower prices in the Materials and Chemicals segments, in addition to the uncertainties in the market and “cautious ordering” by customers.
 
“As expected, isocyanate prices declined considerably. In addition, there were scheduled turnarounds at the steam crackers and falling margins for cracker products. These factors had a significant negative impact on earnings in the two segments,” said Martin Brudermüller, chairman of the board of executive directors of BASF SE Oct. 24.
 
The geopolitical conditions, he added, are and will remain challenging for BASF.
 
“In particular, the trade conflict between the United States and China is weighing on our business. Moreover, there are uncertainties related to Brexit,” Brudermüller said.
 
The issues, according to Brudermüller, are acting as a drag on the economy, impacting not just export-oriented countries in Europe but also causing a noticeable slowdown in the United States.
 
“It is not within our power to change the unfavorable underlying conditions,” Brudermüller said adding, “however, we know exactly what we have to address within BASF. And we are working on this with speed and determination.”
 
The company official said BASF was “rapidly and systematically” reshaping its organization toward greater customer focus and leaner structures.
 
“We are using the time this year to implement our corporate strategy. We are streamlining our administration, focusing the roles of services and regions, and simplifying procedures and processes. We have already made good progress in reshaping our organization,” he added.
 
As of 1 Oct, the German chemicals giant has completed the organizational reassignment of around 20,000 employees, who are being shifted into individual businesses in a decentralization move.
 
Brudermüller also confirmed the 2019 outlook for the BASF Group.
 
The company still expects a slight decline in sales. For EBIT before special items, BASF said it expected a considerable decline of up to 30 percent. The company reported sales of 62.6 billion euros ($69 billion) and EBIT before special items of 6.35 million euros ($7 million) in 2018.