BASF makes strong start to 2021

BASF was able to carry over the tailwinds from the strong fourth quarter of 2020 into the first quarter of 2021

“BASF had a strong start to the year 2021. We were able to carry over the tailwinds from the strong fourth quarter of 2020 into the first quarter of 2021,” said Martin Brudermüller, chairman of the Board of Executive Directors of BASF.

In the first quarter of 2021, BASF increased sales by €2.6 billion ($3.15 billion) compared with the first quarter of 2020 to €19.4 billion ($23.5 billion), due to higher prices and volume growth.

Also, compared with the same quarter of the year prior, earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose by €748 million ($905.97 million) to €3.2 billion ($3.9 billion) in the same period.

Income from operations before depreciation, amortisation and special items (EBITDA before special items) increased by €602 million ($729.14 million) to €3.2 billion.

Income from operations (EBIT) before special items rose by 42 per cent, to €2.3 billion ($2.8 billion). This was primarily attributable to considerably higher earnings contributions from the materials and chemicals segments.

Besides, the surface technologies segment also recorded considerable earnings growth thanks to the recovery in automotive production. Remarkably, all regions contributed to the considerable increase in BASF Group’s earnings in the first quarter of 2021.

BASF SE proposes a dividend of €3.30 ($3.99) per share for the 2020 business year. If this dividend proposal is accepted, around €3 billion ($3.6 billion) will be paid out to shareholders on May 4.

BASF Group outlook for 2021

Based on the development of sales and earnings in the first quarter of 2021, the stronger-than-expected recovery of the global economy and much higher raw materials prices than planned, the BASF Group forecasts its sales growth and EBIT before special items to be between €68 billion ($82.3 billion) and €71 billion ($85.94 billion), and €5-5.8 billion ($6-7), respectively.

In addition, the group targets the return on capital employed (ROCE) of 9.2-11.0 per cent, increase in accelerator sales to €19-20 billion ($23-24.2 billion), and stabilisation of CO2 emissions at between 20.5-21.5 million metric tonnes (unchanged).

Notably, these numbers have been positively targeted higher than the number in the previous forecast from the BASF report 2020.

BASF stated that the market environment continues to be dominated by a high level of uncertainty. Risks could arise if restrictions on macroeconomic activity continue for longer than expected as a result of measures to fight the coronavirus pandemic. Opportunities could arise from a faster vaccination rate and a more rapid recovery of the economy as a whole, as well as a continuation of the positive margin trend.

Earnings development in BASF segments in first quarter

Compared with the first quarter of 2020, sales in the chemicals segment rose considerably by 16 per cent to €2.7 billion ($3.27 billion), primarily due to significantly higher price levels. Besides, sales volumes increased significantly as well.

EBIT before special items amounted to €558 million ($675.7 million). It rose considerably compared to the first quarter of 2020 in both divisions, especially in the petrochemicals division. Earnings development in both divisions was driven by higher margins as a result of a recovery in demand, an improvement in income from equity-accounted companies, and lower fixed costs.

In the materials segment, sales rose by 20 per cent to €3.4 billion ($4.1 billion), considerably higher than the same quarter a year prior. The sales increase was mainly attributable to significantly higher prices and volumes.

EBIT before special items rose considerably to €672 million ($813.73 million). This was mainly driven by a significantly higher earnings contribution from the monomers division due to improved isocyanate margins on the back of higher prices.

Sales of €2.1 billion ($2.54 billion) in the industrial solutions segment were at the same level as the year before. Slightly higher sales in the dispersions and pigments division were offset by a slight decrease in the performance chemicals division.

At €266 million ($322.1 million), EBIT before special items was slightly below the same quarter of the previous year. Considerably higher earnings in the dispersions and pigments division were unable to completely offset the significantly lower earnings contribution from the performance chemicals division.

Sales in the surface technologies segment rose by 37 per cent compared with the first quarter of 2020 to €5.9 billion ($7.14 billion). This increase was largely attributable to higher price levels in the catalysts division as a result of higher precious metal prices. Significantly higher volumes in both divisions also contributed to the development of sales.

EBIT before special items rose considerably compared with the first quarter of 2020 to €360 million ($435.93 million). This was largely driven by volume growth in both divisions. The positive development in earnings was supported by lower fixed costs, especially in the catalysts division.

Sales in the nutrition and care segment declined slightly in both divisions and were down overall by 3 per cent compared with the quarter in the previous year. The development of sales primarily reflected negative currency effects, mainly relating to the US dollar.

EBIT before special items decreased considerably compared over-year. The decline in earnings impacted both divisions and primarily reflected lower margins as a result of lower sales.

Sales in the agricultural solutions segment rose slightly by 1 per cent compared with the first quarter of 2020 to €2.8 billion ($3.4 billion). Volumes were above the corresponding quarter of the previous year in all regions. Higher price levels also contributed to sales growth. Significantly negative currency effects had an offsetting impact.

At €807 million ($977 million), EBIT before special items was on a level with the first quarter of 2020. Strong volume growth and lower fixed costs compensated for the negative currency effects.

Sales in other segments amounted to €783 million ($948.17), up 12 per cent compared with the first quarter of 2020. This was primarily the result of considerable sales growth in commodity trading.

EBIT before special items declined considerably to minus €560 million ($678 million). This was mainly due to higher additions to provisions for variable compensation components as a result of the strong first quarter of 2021.