BASF's Profit Growth May Hit Bottom; German Industry Faces New Crisis!

On Wednesday, global chemicals giant BASF released a forecast, pointing to earnings growth for the full year at the lower end of its target range due to weaker demand for chemicals and plastics. The news adds BASF to a list of German industrial giants that have come under pressure recently due to the weak German economy.

The world's leading chemicals maker further explained that it expects 2024 earnings before interest, taxes, depreciation and amortization (EBITDA), after adjusting for one time, to be near the bottom of its forecast range of 8 billion euros ($8.7 billion) to 8.6 billion euros. That was slightly higher than last year's 7.67 billion euros. "Compared to our expectations at the beginning of the year, business development was weaker in the automotive industry and agriculture sectors," BASF Chief Executive Markus Kamieth said in a statement posted on the group's website.

Earlier this year, Kamieth continued his predecessor's efforts to cut more than €2 billion in annual costs in Europe as Germany's industrial outlook deteriorated. This week, German auto giant Volkswagen announced plans to close three plants in Germany, a move that further adds to the worsening business outlook in Europe's largest economy and heps pressure on Chancellor Olaf Scholz's coalition government.

BASF also reported a 5% rise in third-quarter operating profit, an increase largely driven by growth in precursor chemicals for plastics and ammonia, despite a slump in its agriculture division. The situation highlights the mixed picture of businesses that ceos plan to separate.

Quarterly adjusted EBITDA came in at 1.62 billion euros (about $1.75 billion), slightly below the average analyst estimate of 1.67 billion euros posted on the company's website. Kamieth, who has been at the helm since April, is preparing to float part of the agrochemicals business and is considering new ownership options for the paints division.

As part of the overhaul, BASF will also separate its battery chemicals and catalytic converters businesses from the rest of the company so it can manage them more autonomously. Kamieth called the remaining units, which are highly integrated due to shared technology infrastructure, BASF's "core businesses," and he said Wednesday that they had positive earnings momentum in the current quarter.