Basf releases global results

“In the first quarter of 2019, Basf Group sales grew by 3% in the period to €16,2 billion”, informed  Martin Brudermüller, president of the Board of Directors of Basf SE, at the company’s Annual Shareholders Meeting, held at the Convention Center Rosengarten in Mannheim, Germany. Compared to the first quarter of 2018, results from operating activities (EBIT) before extraordinary items decreased by €549 million, to €1,7 billion. “As expected, this is mainly due to considerably lower contributions from the Materials and Chemicals segments. In these segments, we had exceptionally high isocyanate margins and solid cracker margins in the first quarter of the previous year," said Brudermüller. EBIT before special items also fell in Others and in the Nutrition and Care segment, while in the Health Technologies segment On the surface, results were at the same level as the previous quarter.On the other hand, the Agricultural Solutions and Industrial Solutions segments registered a great improvement in results.

Global economic growth in the first quarter of 2019 was influenced by geopolitical advances and trade conflicts, mainly between the United States and China. Consequently, the Basf Group observed weaker demand from key client industries, especially the automotive sector.

Prices fell by 2% compared to the first quarter of the previous year, mainly attributed to business with isocyanate and cracker products. Higher prices in the Surface Technologies, Agricultural Solutions and Industrial Solutions segments only partially offset the expected price decline in the Materials and Chemicals segments. Due to cautious customer purchasing behavior, sales volumes in the BASF Group fell by 4%. The growth in sales was primarily due to portfolio effects in the Agricultural Solutions segment resulting from the acquisition of key businesses and assets from Bayer in August 2018. Currency effects also had a positive impact on sales across all segments.

At €26 million overall, extraordinary items in EBIT were positive in the first quarter of 2019, compared to a decrease of €18 million in the same quarter last year. The special result arising from divestments in the Agricultural Solutions and Industrial Solutions segments exceeded integration costs, special fees for restructuring measures and other fees.

EBIT fell by €505 million compared to the first quarter of 2018, to €1,8 billion. Profit before income tax fell by €520 million to €1,6 billion. The tax rate increased from 24,1% to 25,4%.

Profit after tax from continuing operations fell from €415 million to €1,2 billion. The after-tax result from discontinued operations, which covers BASF's oil and gas activities, increased by €97 million, reaching €274 million. This fact is largely due to the significant increase in volumes, mainly in Russia, as well as the suspension of depreciation and amortization since the group's recognition for disposal in the third quarter of 2018.

Net income fell by €273 million, to €1,4 billion. Earnings per share were €1,53 in Q2019 2018 – Q1,83 1,65: €2018. Earnings per share adjusted for extraordinary items and amortization of intangible assets totaled €1,93 (QXNUMX XNUMX: €XNUMX).

In the first quarter of 2019, cash flow from operating activities totaled €373 million, €858 million below figures for the same quarter in the previous year. Free cash flow fell from €604 million in the same quarter last year to minus €368 million, mainly as a result of improved cash flows from operating activities.

Merger of Wintershall and DEA

Following approval by all relevant authorities, on May 1, 2019, BASF and LetterOne completed the merger of Wintershall and DEA. “With Wintershall Dea we have created the leading independent European exploration and production company, with international operations in key regions. By combining the two German-based entities, BASF and LetterOne lay the foundation for the strong and prosperous growth of Wintershall Dea,” said Dr. Hans-Ulrich Engel, Vice Chairman of the Management Board of BASF SE, in a conference call on the results of the first quarter of 2019.

Proposed dividend of €3,20 per share

The Board of Executive Directors and the Supervisory Board proposed to the Annual Shareholders' Meeting that the dividend be increased by €0,10 to €3,20 per share. “Therefore, BASF stock offers an attractive dividend yield of 5,3% based on the 2018 year-end share price of €60,40,” said Brudermüller. Following the adoption of the relevant resolution by the Annual Shareholders' Meeting, a total of €2,9 billion will be paid to BASF SE shareholders on May 8.

Outlook for 2019 confirmed

Basf's expectations for the global economic environment in 2019 remain unchanged:

 Gross domestic product growth: 2,8%

 Industrial production growth: 2,7%

 Growth in chemical production: 2,7%

Average euro/dollar exchange rate of US$1,15 per euro

Average oil price of US$70 per barrel of Brent oil

Basf confirms the sales and revenue forecast for the BASF Group made in the 2018 BASF Report and expects a slight increase in sales, as well as a slight increase in EBIT before extraordinary items, which should be at the lower end of the range of 1% to 10%. Return on capital employed (ROCE) should be slightly higher than the cost of capital percentage, with ROCE slightly lower than in 2018.

Business performance across segments in the first quarter of 2019

Sales in the Chemicals segment, which covers Petrochemicals and Intermediates, fell by 13% compared to the first quarter of 2018, to €2,5 billion. The Petrochemicals division, in particular, saw a sharp drop in sales, while the Intermediates division recorded a slight decline. Sales performance was influenced by lower volumes and prices in both divisions.

Compared to the same quarter last year, EBIT before extraordinary items fell by €169 million, to €306 million. The two divisions recorded lower results, especially Petrochemicals. The performance of EBIT before extraordinary items is largely due to lower margins in the Petrochemicals division, mainly for steam cracker products, in addition to lower volumes in both divisions. Furthermore, the fixed costs of the two divisions showed a slight increase. In the Petrochemicals division, the increase was mainly due to high maintenance expenses, while in the Intermediates division, the performance of fixed costs was negatively influenced especially by exchange rate effects.

In the Materials segment, which encompasses Performance Materials and Monomers, sales of €2,9 billion showed a 15% drop compared to the first quarter of 2018. The two divisions, Monomers and Performance Materials, showed a drop in sales, mainly due to lower prices for isocyanates in the Monomers division.

EBIT before exceptional items fell across both divisions, reaching €323 billion compared to €816 million in the same quarter last year. This drop mainly results from lower isocyanate margins in the Monomers division. In the Performance Materials division, higher margins were unable to compensate for lower volumes, particularly in the automotive sector. Furthermore, the fixed costs of both divisions were slightly higher than in the same quarter of the previous year, mainly due to exchange rate effects.

In the Industrial Solutions segment, which covers Dispersions and Pigments and Performance Chemicals, sales of €2,2 billion were 2% lower than sales in the same quarter last year. Sales in the Dispersions and Pigments division remained at the same level as in the first quarter of 2018, while sales in the Performance Chemicals division showed a slight decrease. The decline in the period was mainly due to the transfer of BASF's paper and water chemicals business, which was previously reported under Performance Chemicals, to the Solenis group.

The Industrial Solutions segment increased EBIT before special items by 15% compared to the first quarter of 2018 to €264 million. This was mainly due to the considerably higher EBIT before special items in the Performance Chemicals division, resulting from higher prices, increased volume and positive currency effects. The Dispersions and Pigments division also showed a slight increase in EBIT before extraordinary items, mainly due to higher prices and positive exchange rate effects. The segment's EBIT included special revenues in the Performance Chemicals division arising from the transfer of the paper and water chemicals business from BASF to the Solenis group.

Compared to the first quarter of 2018, sales in the Surface Technologies segment, which encompasses Catalysts, Paints and Construction Chemicals, increased by 13% to €3,6 billion. Sales growth in the Catalysts division was particularly strong. Sales also showed a considerable increase in the Construction Chemicals division. In the Paints division, sales were at the same level as in the same quarter in the previous year. The increase in sales can be attributed to higher prices across all divisions, as well as positive currency effects and higher volumes in the Catalysts and Construction Chemicals divisions.

At €159 million, EBIT before extraordinary items for the segment remained at the level of the same quarter in the previous year. EBIT before special items in the Construction Chemicals division showed considerable improvement, mainly due to higher margins. In the Catalysts division, results saw a slight increase as a result of sales growth. On the other hand, the Paints division recorded a considerably lower EBIT before extraordinary items, mainly due to the weakening of the automotive business.

Sales of €1,6 billion in the Nutrition & Care segment, which encompasses Care Chemicals and Nutrition & Health, remained at the level of the same quarter in the previous year. Considerably higher sales in the Nutrition and Health division were offset by somewhat lower sales in the Care Chemicals division.

At €222 million, EBIT before special items was 13% below the €254 million recorded in the first quarter of 2018. This can mainly be attributed to higher fixed costs in the Nutrition and Health division, largely due to insurance reimbursement received in the same quarter of the previous year, due to declines in production in 2017. Additionally, margins declined in the animal nutrition business, resulting in a significant decline in revenue for the Nutrition and Health division in general. A large improvement in revenue in the Care Chemicals division, mainly due to higher margins, had an offsetting effect.

Sales of €2,6 billion in the Agricultural Solutions segment were 53% higher than in the first quarter of 2018. This can be mainly attributed to the portfolio effects of the acquisition of important Bayer businesses and assets in August 2018. BASF also achieved a higher price level in the legacy business, while sales volumes were considerably lower in the period, mainly due to weather factors.

EBIT before special items of €740 million was 75% higher than in the first quarter of 2018, largely because of the contribution from the acquired businesses. EBIT included special revenues from divestments, according to the conditions imposed by antitrust authorities in the scope of the acquisition of Bayer's businesses. In the first quarter of 2019, EBIT exceeded the special rates for the integration of acquired businesses.

Sales in Others showed a considerable increase compared to the same quarter in the previous year. This is mainly due to the remaining activities of Basf's paper and water chemicals business, which were not included in the transfer to Solenis and have since been reported in Other. EBIT before extraordinary items was well below numbers for the first quarter of 2018, mainly due to foreign exchange results and valuation effects from our long-term incentive program.

The full statement in English here