BASF with solid start to the year: EBITDA before special items in first quarter of 2024 slightly above analysts’ consensus

Date:04-25-2024

BASF got off to a solid start in 2024. The company today presented figures for the first quarter of 2024, on the day of the Annual Shareholders’ Meeting held in the Congress Center Rosengarten in Mannheim, Germany. For this event, BASF expects a similar attendance as in 2023 with around 5,000 shareholders and shareholder representatives.

Sales in the first quarter of 2024 amounted to €17.6 billion, €2.4 billion below the figure of the prior-year quarter. This decline in sales was mainly driven by considerably reduced prices as a result of lower raw materials and energy prices in almost all segments as well as lower precious metal prices in the Surface Technologies segment. Negative currency effects contributed to the sales decrease in all segments. Considerable growth in sales volumes in the Chemicals, Materials, Nutrition & Care and Industrial Solutions segments had a positive impact on sales. This more than compensated for lower volumes in the Agricultural Solutions and Surface Technologies segments.

Income from operations before depreciation, amortization and special items (EBITDA before special items) amounted to €2.7 billion, 5.7 percent higher than the average of analysts’ estimates. Compared with the first quarter of 2023, EBITDA before special items decreased by €153 million or 5.3 percent. The Nutrition & Care, Materials, Industrial Solutions and Chemicals segments increased EBITDA before special items, in some cases significantly, mainly due to reduced fixed costs as well as predominantly volume-related higher contribution margins. Despite these earnings increases, the BASF Group’s EBITDA before special items declined slightly, in particular due to the considerable decline in earnings of Other, which was primarily attributable to higher bonus provisions. The Agricultural Solutions and Surface Technologies segments also recorded lower EBITDA before special items than in the first quarter of 2023.

EBITDA amounted to €2.7 billion compared with €2.8 billion in the prior-year period. The EBITDA margin before special items was 15.4 percent, up from 14.3 percent in the prior-year quarter. At €1.7 billion, EBIT was €177 million below the figure of the prior-year quarter. Depreciation and amortization amounted to €965 million (prior-year quarter: €944 million).

Income after taxes declined by €193 million compared with the first quarter of 2023 to €1.4 billion. Noncontrolling interests of €43 million were almost at prior-year level. As a result, net income amounted to €1.4 billion (prior-year quarter: €1.6 billion).

Development of cash flows in the first quarter of 2024

Cash flows from operating activities amounted to minus €0.5 billion, compared with minus €1.0 billion in the prior-year quarter. The improvement was primarily due to lower cash outflow from net working capital. Free cash flow, which was negatively impacted by the typical seasonal increase in receivables in the Agricultural Solutions segment, improved to minus €1.5 billion in the first quarter of 2024 compared with minus €1.9 billion in the prior-year quarter.

Business Review - Agricultural Solutions segment

In the Agricultural Solutions segment, sales in the first quarter of 2024 fell considerably compared with the prior-year quarter. This was in line with the expectations due to the above-average strength of the first quarter of 2023, as well as the persistently cautious purchasing behavior of distributors and the high channel inventories. Lower volumes of crop protection products and negative currency effects were the main reasons for the decline in sales. In contrast, prices increased slightly.

Sales in Europe declined considerably due to lower volumes of crop protection products and negative currency effects, particularly from the Turkish lira. Higher prices had a positive effect.

In North America, sales decreased considerably due to lower volumes of herbicides, negative currency effects, mainly from the U.S. dollar, and lower prices.

In Asia, a considerable decline in sales was recorded due to negative currency effects, particularly from the Chinese renminbi,as well as lower sales volumes, predominantly in herbicides. Prices increased.

Sales in the region South America, Africa, Middle East fell considerably. Reduced volumes in fungicides, seed treatment and herbicides, negative currency effects, mainly from the Argentine peso, and lower prices were the main drivers of this development.

EBITDA before special items decreased slightly compared with the first quarter of 2023 due to lower volumes. The segment’s EBITDA margin before special items rose to 39.1% as a result of the product mix, compared with 36.8% in the prior-year period.

Season-related negative segment cash flow improved slightly compared with the prior-year quarter. This was mainly due to lower receivables buildup as a result of lower sales.

BASF Group outlook for 2024

The assumptions regarding the global economic environment in 2024 from the BASF Report 2023 remain unchanged:

• Growth in gross domestic product: +2.3%

• Growth in industrial production: +2.2%

• Growth in chemical production: +2.7%

• Average euro/dollar exchange rate of $1.10 per euro

• Average annual oil price (Brent crude) of $80 per barrel

The BASF Group’s forecast for the 2024 business year published in the BASF Report 2023 also remains unchanged:

• EBITDA before special items of between €8.0 billion and €8.6 billion

• Free cash flow of between €0.1 billion and €0.6 billion

• CO₂ emissions of between 16.7 million metric tons and 17.7 million metric tons

The development of the global economy is still subject to uncertainty. The global chemical industry recovered slightly in the first quarter of 2024. It grew considerably faster than overall industrial production because the customer industries somewhat restocked their very low inventories.