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BASF Rises After Company Maintains Forecasts Despite Economic Slowdown

By Geoffrey Smith -- BASF (ETR:BASFN) stock rose on Wednesday after Europe's largest chemicals company maintained its guidance for the full year despite ferocious headwinds from soaring energy prices and the global economic slowdown.

The company said it still expects sales of between 86 billion and 89 billion euros this year, with earnings before interest, taxes and special items of 6.8 billion-7.2 billion euros and a return on capital employed of between 10.5% and 11%,

That's down largely to support from the euro's weakness this year, which bolsters the margins of its non-European sales, and due to its success in passing on higher input prices in many of its segments.


By 05:25 ET (09:25 GMT), BASF stock was up 1.2% in Frankfurt, testing the four-month high that it hit earlier in the week.

The German giant had already warned earlier in the month of a big hit to its profits from the surge in energy prices this year. It announced efficiency measures earlier this month that it hopes will save it 500 million euros a year in annual costs going forward.

In the third quarter, EBIT before special items fell by just over a quarter from a year earlier to 1.3 billion euros ($1.3 billion), as improvements in its downstream operations, as well as buoyant operating earnings at its oil-producing subsidiary DEA, cushioned the blow from its chemicals and materials businesses. BASF is Europe's largest industrial consumer of natural gas, and the gas bill at its European sites over the first nine months of the year was up a staggering 2.2 billion euros from a year earlier, a stark illustration of how much the war in Ukraine and its parallel economic dimension has cost European industry.

BASF's stock price had lost nearly half its value in the year through June as the simmering crisis in Ukraine erupted into war, sending European gas and electricity prices through the roof. However, it has recovered in the last three months as gas prices have come off their extreme highs. Front-month gas futures in northwest Europe are now less than one-third of their peak, although longer-dated futures contracts suggest they will rise again next year unless Russian supplies are restored.

Restoring Russian supplies has been made more complicated by the sabotage attacks on the Nord Stream pipelines under the Baltic Sea, where BASF holds a stake through its DEA subsidiary. BASF was forced to write down its stake by 740 million euros in the quarter after the attacks badly damaged the pipeline.

The company's bottom line was also hurt by a 60% drop in income from its Chinese subsidiary.

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