By Ludwig Burger
FRANKFURT (Reuters) -BASF is banking on regaining pricing power to speed up earnings growth in the second half after the German chemicals group’s adjusted profit edged 0.6% higher in the second quarter, with China playing a key role.
BASF CEO Markus Kamieth, who took the helm in April, said much depended on demand growth in China. After three years of lower-than-expected economic growth there, chemicals makers in the country have been exporting excess production globally at marked-down prices.
“That can change very quickly because when China’s industrial activity goes up… which currently is happening, than these capacities will also be absorbed quickly,” CEO Kamieth said in an analyst call.
“Our forecast assumes a certain improvement in pricing power in the second half of the year,” he said.
In a statement on Friday, the group said quarterly earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for one-offs, came in at 1.96 billion euros ($2.13 billion), slightly below the average analyst estimate posted on the company’s website.
BASF shares were down 2.2% at 0840 GMT, erasing gains earlier this week, and were the worst performers on Germany’s DAX index.
Still, the German chemicals giant confirmed its forecast for 2024 EBITDA before special items to reach between 8 billion euros and 8.6 billion euros, which would be as much as 12% higher than the 7.7 billion reported for 2023.
BASF reported second-quarter volume growth in industrial products, basic chemicals as well as ingredients for food and household products, but profits at its agriculture unit, which competes with Bayer, fell more than expected.
The group, which has been investing heavily in making battery chemicals, also said it was putting on hold plans to build a large battery recycling site in Spain
It had earlier this month said it would review battery investments and on Friday cited much slower adoption of electric vehicles outside China.
CEO Kamieth said the shift towards EVs would continue in the longer term, but BASF would only add capacities if established battery cell makers committed to purchasing chemicals.
A detailed investment review would be published in September.
BASF and its partner Eramet of France last month cancelled a $2.6 billion joint investment in a refining complex in Indonesia to make nickel and cobalt for batteries.
($1 = 0.9211 euros)
(Reporting by Ludwig Burger, Editing by Rachel More, Tomasz Janowski and Jane Merriman)
