BASF raises annual earnings outlook as prices lift sales
BASF raised its annual outlook for earnings before interest, taxes, depreciation and amortisation excluding special items, after higher prices and volumes lifted quarterly sales. Restructuring costs and an impairment weighed on reported operating earnings, which turned negative. Free cash flow increased even as operating cash flow declined, and the company left its annual cash-flow forecast unchanged.
Economics & Markets··Evening
Prices and volumes lift sales
BASF, the German chemicals producer, increased third-quarter sales by 14 per cent to 16.4 billion euros. Prices rose 12 per cent and sales volumes increased 2 per cent. Earnings before interest, taxes, depreciation and amortisation excluding special items rose 15 per cent to approximately 1.6 billion euros. The margin on that measure remained at 10.0 per cent. BASF raised its full-year forecast for the same earnings measure to 7.4–7.8 billion euros, from 6.9–7.7 billion euros. The company maintained its annual free-cash-flow forecast at 1.5–2.3 billion euros.[1], [2]
Restructuring and impairment weigh on profit
Reported earnings before interest and taxes turned from a profit of 232 million euros a year earlier to a loss of 98 million euros. Net income declined to 155 million euros from 172 million euros. Earnings before interest, taxes, depreciation and amortisation including special items were approximately 1.2 billion euros, close to the previous year. Negative special items totaled 437 million euros, mainly reflecting restructuring at Ludwigshafen and settlement of a legal dispute in Care Chemicals. Depreciation and amortisation rose from 976 million euros to 1.3 billion euros, including a 318 million euro impairment in Monomers. Reported earnings per share fell from 0.19 euros to 0.18 euros; adjusted earnings per share rose from 0.52 euros to 0.72 euros.[1]
Lower investment payments lift free cash flow
Cash from operating activities fell by 275 million euros from a year earlier to 1.1 billion euros. Inventories absorbed 507 million euros of cash, mainly with higher raw-material prices, according to BASF. The disposal of Harbour Energy shares generated cash proceeds of 434 million euros. Payments for property, plant, equipment and intangible assets declined by 401 million euros. BASF mainly attributed the reduction to lower payments for its Zhanjiang site in China. Free cash flow increased by 125 million euros to 523 million euros. The annual cash-flow range remained unchanged while the company increased its forecast for earnings excluding special items.[1]
