BASF's Core Business Growth Offset by Declining Autonomous Business, Huge Special Project Losses Hidden Behind Net Income Growth!

In the third quarter of 2024, the BASF Group achieved sales of 15.7 billion euros, flat compared to the same period last year. Excluding special items, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) reached 1.6 billion euros, an increase from 1.5 billion euros in the same period last year. The growth was mainly due to a significant increase in core business earnings, which rose by 77 million euros to a total of 1.6 billion euros. BASF's Executive Board Chairman, Dr. Martin Brudermüller, noted, "The momentum of our core business profitability growth was already visible in the first half of 2024 and continued into the third quarter. This growth is due to increased sales volumes and profits." However, this growth was partly offset by a significant decline in earnings from autonomous businesses and other businesses.

According to the strategy released in September 2024, the BASF Group implements differentiated management for its core businesses (including chemicals, materials, industrial solutions, nutrition & care) and autonomous businesses in specific industries. Autonomous businesses are primarily reflected in the fields of surface treatment technology and agricultural solutions.

Third-quarter sales were flat compared to the same period last year at 15.7 billion euros. Sales volumes increased in almost all business areas, driving overall sales performance. Sales volumes for both core businesses and agricultural solutions increased. However, in the surface treatment technology business area, the catalyst department saw a decline in sales volumes due to weak demand in the automotive market. Currency exchange rate fluctuations had an adverse effect on sales, mainly due to the depreciation of the Argentine peso and the Brazilian real. Prices in almost all areas declined, especially in the surface treatment technology business area, where the prices of precious and base metals also had an impact on sales performance.

Excluding special items, the EBITDA margin for the third quarter was 10.3%, compared to 9.8% last year. The EBITDA margin for core business increased by 3.6 percentage points to 13.4%, compared to 9.8% last year.

Third-quarter EBITDA was 1.3 billion euros, compared to 1.4 billion euros last year. This figure included a special item of minus 345 million euros, mainly from the agricultural solutions department. The department made provisions due to the announcement in July 2024 to close the glufosinate-ammonium production facility and related sites.

Third-quarter earnings before interest and taxes were 250 million euros, a decrease of 144 million euros compared to last year. Depreciation and amortization expenses were 1 billion euros, compared to 969 million euros last year.

Third-quarter net income was 287 million euros, compared to a negative 249 million euros last year. This significant increase was mainly due to an increase in net equity earnings, primarily from a special gain of 398 million euros from transferring Wintershall Dea assets to Harbour Energy plc. Last year, Wintershall Dea incurred a special item of minus 291 million euros.

Third-quarter cash flow from operating activities was 2.1 billion euros, a decrease of 633 million euros compared to last year. The main reason for this decline was an increase in cash used for trade payables of 674 million euros. At the same time, cash released from inventories decreased by 339 million euros. Third-quarter free cash flow was 569 million euros, compared to 1.5 billion euros last year.

Chief Financial Officer Dr. Dirk Elvermann provided an update on the cost-cutting plan currently underway: "We are steadily advancing according to plan, with the goal of achieving annual cost savings of 2.1 billion euros by the end of 2026. The cost-cutting plan announced in February 2023 has been fully initiated." By the end of September 2024, BASF had successfully achieved annual cost savings of about 800 million euros, with related one-time costs of about 500 million euros. It is expected that by the end of the year, the company will achieve annual cost savings of more than 800 million euros, with related one-time costs expected to reach 550 million euros.

BASF is also advancing the additional cost-cutting plan launched in 2024, aimed at enhancing the competitiveness of the Ludwigshafen production site. Recently, the departments at this site have clarified the contributions they need to make by the end of 2026.

In 2022, the European Union enacted the Corporate Sustainability Reporting Directive (CSRD), which imposes more comprehensive requirements on sustainability reporting. Therefore, BASF will have two publication dates in the future.

On February 28, 2025, BASF will publish its 2024 fiscal year results for the first time in an unaudited online report format. This report will include all key financial and non-financial data for 2024 and outlook for 2025.

The audited "BASF Group 2024 Performance Report" will be published on March 21, 2025. This report will include all legally required financial data, as well as environmental, social, and governance (ESG) information, and will be available online and as a clickable PDF document, with no printed version produced.

BASF Group's assumptions for the global economic environment in 2024 remain unchanged:

Global GDP growth rate: +2.3%

Global industrial production growth rate: +2.2%

Global chemical production growth rate: +2.7%

Average exchange rate for the euro against the US dollar: 1 euro = 1.10 US dollars

Average price of Brent crude oil: US$80 per barrel

BASF Group's forecast for 2024 performance remains unchanged, consistent with the content described in the "BASF Group 2023 Performance Report."

Excluding special items, EBITDA is expected to be between 8 and 8.6 billion euros.

Group free cash flow is expected to be between 100 and 600 million euros.

Group carbon dioxide emissions are expected to be between 16.7 and 17.7 million tons.

Based on the information currently available, BASF expects that full-year EBITDA excluding special items for 2024 will reach the lower end of the forecast range. In the fourth quarter of 2024, there is a potential risk of price declines and lower-than-expected sales growth, while positive developments in demand and profits could bring new opportunities.