Ludwigshafen, Germany — EBIT at BASF could be down by 71% in the second quarter of 2019 as poor industrial and automotive production, trade issues and a hard winter in North America came together.
In a stock market announcement, BASF said that EBIT could be EUR 500m, compared to EUR 1.9bn in the second quarter of 2018.
‘As expected, significantly lower isocyanate prices led to a considerable year-on-year decline in the materials segments EBIT before special items,’ the company said.
It added that net income is likely to increase to EUR 6.5bn from EUR 1.5bn in 2018. This is because of a book gain from its exit from Wintershall, the gas and energy company, which took place on 1 May 2019.
The automotive sector is a key market for the German giant. BASF said that global car production is down by 6% worldwide in the first half of 2019. In China the fall is greater: 13% in the same period, said BASF. In Europe in June, new car registrations fell by 8% compared with the same month in 2018, for example.
In its forecast for 2019, BASF assumed that the trade conflicts between the US and China would be short-lived.
‘The G20 summit at the end of June has shown that a rapid detente is not to be expected in the second half of 2019,’ the company said. ‘Uncertainty remains high.’
Preliminary figures show that across-the-board sales declined by 4% in the second quarter of 2019. Sales fell to EUR 15.2bn ,compared to EUR 15.8bn in Q2 2018.
Second-quarter 2019 EBIT before special items is expected to be EUR 1bn. That is 47% below the 2018 second-quarter figure. The fall is a result of lower earnings in materials, chemicals and agricultural solutions business segments.
The company added that turnarounds and crackers in Port Arthur, Texas and Antwerp, Belgium, hit the numbers. Margins for steam cracker products in North America were lower than BASF had forecast.
Looking ahead to the rest of the year, the company blamed trade conflicts for the global slowdown. By the end of 2019, it said, EBIT before special items could be down as much as 30% on 2018.