3Q revenue falls by €6.2 billion to €15.7 billion due to lower prices and volume
German chemicals maker BASF Group’ said today that sales in the third quarter of 2023 amounted to €15.7 billion, down by €6.2 billion compared with the prior-year period.
The decline was mainly due to considerably lower prices, primarily in the materials, chemicals and surface technologies segments.
Higher prices in the agricultural solutions segment had a positive effect. In addition, sales performance was weighed down by considerably lower volumes in all segments.
“Sales volumes were considerably lower than in the prior-year quarter across all customer industries – with the exception of automotive,” said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF, presenting the quarterly figures together with Chief Financial Officer Dr. Dirk Elvermann.
Compared with the prior-year quarter, income from operations (EBIT) before special items declined by €772 million to €575 million.
Net income amounted to minus €249 million, compared with €909 million in the prior-year quarter. Besides the lower EBIT, this decline was driven by the overall negative earnings of Wintershall Dea due to special items.
Total assets amounted to €82.6 billion as of September 30, 2023, €1.9 billion below the 2022 year-end figure. On September 30, 2023, net debt amounted to €18.9 billion. This was an increase of €2.6 billion compared with year-end 2022, but a decrease of €1.4 billion compared with June 30, 2023. The equity ratio at the end of the third quarter of 2023 was slightly higher than at the end of the year 2022 and stood at 48.8 percent. “Overall, this demonstrates BASF’s financial strength with a strong balance sheet and good credit ratings,” said Dr. Dirk Elvermann.
Cash flows from operating activities were €2.7 billion in the third quarter of 2023, above the €2.3 billion reported in the prior-year quarter. “This is a remarkable improvement in view of the significantly lower net income,” said Elvermann. Cash released from net working capital improved considerably by €1.2 billion compared with the third quarter of 2022, amounting to €1.9 billion. The improvement was primarily due to the reduction in inventories. Free cash flow totaled €1.5 billion in the third quarter of 2023, after €1.3 billion in the prior-year period.
BASF is consistently working on its cost structures to improve its competitiveness, particularly in Europe. At the end of February 2023, the company had announced a cost savings program focusing on Europe as well as the adjustment of Verbund structures in Ludwigshafen.
BASF now expects annual cost savings in non-production areas to reach more than €600 million by the end of 2024 and more than €700 million by the end of 2026. This includes measures related to Europe in the Global Business Services and Global Digital Services units. Additional measures in these two service units in other regions will contribute a further €200 million. Elvermann, said: “Together with the €200 million in savings from the adaptation of the Verbund structures in Ludwigshafen, we will achieve total annual savings of around €1.1 billion by the end of 2026.”
In the fourth quarter of 2023, BASF expects production in the global chemical industry to further stabilize. However, the macroeconomic outlook remains extremely uncertain in the current interest rate policy environment and in view of increasing geopolitical risks. Rising raw materials prices in particular could weigh on demand and margins.
The BASF Group’s forecast for the 2023 business year published in the Half-Year Financial Report 2023 also remains unchanged.
“We meanwhile expect sales and EBIT before special items at the lower end of the respective ranges,” said Brudermüller. If chemical production does not stabilize, there are risks from a further decline in volumes and a stronger price reduction than expected.
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