(Bloomberg) — BASF SE will make significant price rises in coming months to offset soaring energy bills that added 800 million euros ($897 million) to costs in Europe during the fourth quarter alone.
For this year, BASF sees sales and earnings slipping as global growth to moderates amid multiple supply chain pressures, it said Friday reporting full-year earnings. Europe’s biggest chemicals maker is increasingly feeling the pinch from rising inputs, which the company has so far successfully passed on to consumers.
There’s a “big margin squeeze on higher input prices,” Sebastian Bray, analyst at Berenberg said in a note. BASF’s result was a “negative readacross for most industrial chemical companies.”
BASF expects earnings before interest and tax excluding special items as high as 7.2 billion euros ($8.1 billion) this year, below earnings of 7.8 billion euros it reported for 2021, when profit rose on soaring demand for chemicals and materials. While the manufacturer forecast 2022 earnings would undershoot last year’s levels, the top end of the firm’s guidance was slightly higher than analyst estimates.
The shares fell 1.3% in early trading in Frankfurt.
As BASF, one of Europe’s biggest corporate energy users, battles pressure from surging natural gas, oil and electricity prices, Russia’s invasion of Ukraine has triggered fears of further disruption to already tight supplies. So far in the energy crunch, BASF has benefited from strong demand for its main product lines like petrochemicals and polyamides used in textiles. The company’s automotive business declined last year after output disruptions because of the semiconductor shortage across the industry.
The price hikes will help improve margins in BASF’s downstream business, Chief Executive Officer Martin Brudermueller said in a statement.
Oil surged above $105 a barrel for the first time since 2014 on Thursday after Russia attacked sites across Ukraine. BASF unit Wintershall Dea, an oil and gas producer which derived a fifth of its revenue from Russia in 2020, led losses in the euro high-grade corporate bond market.
BASF’s sales during 2021 rose to 78.6 billion euros, exceeding the company’s guidance.
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