Trade wars hit BASF as Covid-19 looms

Flags of the German chemical company BASF are pictured in Monheim, Germany April 20, 2012. — Reuters pic
Flags of the German chemical company BASF are pictured in Monheim, Germany April 20, 2012. — Reuters pic

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FRANKFURT, Feb 28 — German chemical giant BASF today said global trade tensions hit 2019 sales, with the auto sector especially affected, and pointed to a “signficant impact” ahead from the new coronavirus.

“2019 was a challenging year with strong economic headwinds,” including both trade wars and other sources of uncertainty such as Brexit, chief executive Martin Brudermueller said in a statement.

BASF sales fell 1.5 per cent to €59.3 billion (RM275 billion), while operating, or underlying profit slumped sharply.

But the group’s net profit jumped almost 80 per cent, to €8.4 billion, thanks to a one-off effect related to the merger of its oil and gas business Wintershall with DEA.

Looking ahead to 2020, Brudermueller warned that “the coronavirus has added a new factor that is considerably hampering growth... especially in China,” reducing demand and interrupting production.

“We do not expect the corona effects to be fully offset” in any rebound later in the year, he added.

While most customer industries should grow, “for the automotive industry... we anticipate a continued decline in production,” Brudermueller said.

Looking to BASF’s different segments, profits at its basic chemicals division fell by half, while the slide was even steeper at the materials unit, which makes inputs for client industries slammed by the US-China trade conflict such as carmakers and electronics producers.

More specialised “downstream” areas were able to boost operating income, including its catalysts and coatings business, industrial chemicals, nutrition and pharma and agriculture.

BASF’s agriculture business in particular “performed very well”, CEO Brudermueller said, after it acquired activities from former rival Bayer which was forced by competition authorities to divest as part of its takeover of US seeds and pesticides maker Monsanto.

The Ludwigshafen-based group said it was accelerating a job cuts scheme set to reduce its worldwide payroll by 6,000 positions by the end of 2021.

After 3,100 departures last year, dropping headcount to 117,600, the goal should now be reached by the end of 2020, BASF said.

BASF aims to lift sales this year to €60-63 billion, slightly higher than in 2019, while operating profit not including special items should be between 4.2-4.8 billion, after 4.5 billion last year.

The group said it would increase its dividend for 2019 by 10 euro cents, to €3.30. — AFP

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