Resilience amid coronavirus crisis thanks to diversified portfolio and financial solidity

Basf Group’s sales in the first quarter of 2020 increased by 7% compared with the prior-year quarter to 16.8 billion euros. This was mainly driven by a 4% increase in volumes. Income from operations (Ebit) before special items was 1.6 billion euros, down by 6% compared with the first quarter of 2019. The decline in Ebit before special items was mainly attributable to significantly lower contributions from the Chemicals and Materials segments and from Other.

“The first quarter of 2020 was not a normal quarter. The same will be true for the second quarter and likely for the entire year,” said Martin Brudermüller, Chairman of the Board of Executive Directors of Basf, at the presentation of the results for the first quarter of 2020. “The coronavirus has turned the world upside down.” Owing to the very challenging macroeconomic environment, there is great uncertainty in the markets, making reliable planning nearly impossible at the moment. For this reason, concrete statements on the development of sales and earnings in 2020 cannot be made at present.

“Basf’s diversified portfolio offers advantages, especially in difficult times,” said Brudermüller. “Not all of our customer industries are equally affected by the pandemic. They show different degrees of resilience in this environment. For example, pharma, detergents and cleaners, or food. At the moment, they are even experiencing additional demand.” Other customer industries, however, are intensely experiencing the consequences of the pandemic. They are hampered by the low demand from final customers. Moreover, there are production shutdowns and supply chain disruptions. The transportation and automotive sector is seeing the strongest declines right now. Brudermüller: “This decline in demand from our most important customer industry is currently hitting us hardest.”

The sales and earnings forecast for the 2020 business year provided by Basf on February 28, 2020, will not be able to be met. The company is therefore withdrawing its outlook for 2020. It is currently impossible to reliably estimate both the length and the further spread of the coronavirus pandemic, as well as future measures to contain it. Consequently, concrete statements on the future development of sales and earnings cannot be made at present.

Basf expects to be severely impacted by the economic consequences of the global weakness in demand and drop in production, in particular as a result of the ongoing production stoppages in the automotive industry. The effects of the coronavirus pandemic will also impact other customer industries. As a result, the company anticipates a considerable decline in sales volumes in the second quarter of 2020. Basf currently expects a slow recovery for the third and fourth quarters of 2020; how the situation develops is, however, extremely uncertain and not predictable at this point in time. Basf will quantify its expectations for the future development of sales and earnings as soon as it is again possible to make a reliable forecast.