BASF Earns 78.6 Billion Euros Annually, And Continues to Be Optimistic About The Chinese Market in The Future

On February 25, BASF released the company's 2021 performance report. In 2021, BASF Group sales will reach 78.6 billion euros, an increase of 33% over 2020. Dr. Martin Brudermüller, Chairman of the Executive Board of BASF Europe, said: "In 2021, our product prices will increase by 25%, while sales will increase by 11%; all business areas will achieve both sales and sales growth."

In 2021, EBITDA before special items was 11.3 billion euros, an increase of 3.9 billion euros compared to the previous year; EBITDA was 11.4 billion euros, an increase of 4.9 billion euros compared to the previous year . EBIT before special items was 7.8 billion euros, more than double the level in 2020; a 67% increase from the pre-pandemic level in 2019.

BASF's positive profit performance was mainly driven by the Chemicals and Materials business areas. The Surface Technology business area and the Industrial Solutions business area also contributed to the strong recovery.

Regarding the Chinese market, BASF said: It will continue to expand its production base in China and is confident in the development of the Chinese market. BASF's integrated site in Zhanjiang, China, is one of the company's main growth drivers. BASF's chemical production in China will increase by 7.7% in 2021.

Rising energy prices in Europe lead to higher costs

BASF's automotive-related business continued to be negatively affected by semiconductor shortages. In 2021, especially in the fourth quarter, higher raw material prices and higher energy and logistics costs also adversely affected earnings in all business areas. For BASF's European base, further increases in natural gas prices will result in additional costs of around 1.5 billion euros in 2021, reaching 800 million euros in the fourth quarter of 2021 alone.

Brudermüller announced: "We will increase our prices significantly further in the coming months to cope with the sharp increase in costs and thus improve the profitability of the downstream business." The established pricing procedures for these businesses have contributed to the delay.

Cash flow has increased dramatically! Q4 sales of 19.8 billion euros

For the full year 2021, BASF's cash flow from operating activities was 7.2 billion euros and 5.4 billion euros in 2020. This substantial increase was mainly due to an improvement in net income, which amounted to EUR 5.5 billion. Free cash flow in 2021 rose to 3.7 billion euros from 2.3 billion euros in the previous year.

In the fourth quarter of 2021, cash flow from operating activities increased by EUR 1.2 billion to EUR 3.3 billion. Free cash flow was EUR 1.8 billion, an increase of 84% compared to the fourth quarter of 2020.

Sales in the fourth quarter of 2021 increased by 24% compared to the same period last year to 19.8 billion euros. Despite a strong fourth quarter of 2020, BASF's sales in the fourth quarter of 2021, with the exception of the Materials business area, increased compared to the same period last year.

EBITDA before special items rose by around EUR 100 million to EUR 2.2 billion. EBITDA amounted to EUR 2.3 billion, compared with EUR 2.0 billion in the fourth quarter of 2020.

EBIT before special items was 1.2 billion euros in the fourth quarter, compared with 1.1 billion euros in the same period last year. EBIT in the fourth quarter of 2021 was 1.2 billion euros, compared to 932 million euros in the same period last year.

Proposed dividend of EUR 3.40 per share

At BASF's annual general meeting this year, BASF's executive board and supervisory board will propose a dividend of 3.40 euros per share, an increase of 0.1 euros compared to last year, and BASF will pay 3.1 billion euros based on the number of shares at the end of the year. "If this proposal is adopted, BASF will offer a high dividend yield of 5.5 percent based on the share price at the end of 2021," Brudermüller said.

Achieve non-financial goals

BASF has set a target to reduce carbon dioxide emissions by 25% by 2030 compared to 2018. In 2021, BASF's annual carbon dioxide emissions will be 20.2 million tons, down from 20.8 million tons in 2020. "This drop is remarkable given the strong growth in production," Brummeller said.

Much earlier than originally planned, BASF has already achieved its target of around 22 billion euros in sales of excellence products by 2025. These products, which contribute significantly to the sustainable development of the value chain, have reached sales of 24.1 billion euros in 2021. "We will therefore adjust our guidance for this product portfolio during 2022," said Brudermüller.

2022 planned capital expenditure of 4.6 billion euros

BASF's planned capital expenditure for the period 2022 to 2026 is 25.6 billion euros, which is 2.7 billion euros higher than in the previous planning cycle between 2021 and 2025. Hans-Ulrich Engel said: "The main reason is our investment in two key growth projects, the new Zhanjiang integrated site and the battery materials business. They are crucial to the future development of BASF."

BASF's investment in existing businesses has stabilized at an average of 2.6 billion euros per year. Hans-UlrichEngel said that BASF will be very cautious about investments to maintain and achieve profitable growth in existing businesses. "This will ensure that we can also spend an average of around 2.6 billion euros a year on growth projects. Our capital expenditures on growth projects will peak in 2024," he said. Compared to 3.4 billion euros in 2021, BASF The planned capital expenditure in 2022 amounts to EUR 4.6 billion. The annual budget for R&D activities is approximately EUR 2.1 billion.

BASF Group Outlook 2022

We're off to a very strong start to 2022, with numbers presented in January higher than a year earlier. Brudermüller said when looking forward to this year's performance.

After a strong recovery in 2021, BASF expects global economic growth to flatten in 2022, with growth of 3.8%. "Due to the large order backlog in the industrial sector, we expect global industrial production to increase by 3.8% and chemical production to increase by 3.5%," Brummeller said. The company forecasts an average price of $75 per barrel of Brent crude oil. 1.15 USD for 1 Euro.

Based on these assumptions, BASF expects to achieve sales of between EUR 74 billion and EUR 77 billion in 2022. The BASF Group's EBIT before special items is expected to be between 6.6 billion euros and 7.2 billion euros. Return on capital employed (ROCE) is expected to be between 11.4% and 12.6%. Carbon dioxide emissions for the full year of 2022 are expected to be between 19.6 million and 20.6 million tons.

BASF's forecast range takes into account the impact of uncertainty, in particular continued supply chain disruptions, further developments in the Covid-19 pandemic and higher energy prices.