“In the first quarter of 2019, BASF Group sales rose by 3% year on year to €16.2 billion,” said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF SE, at the company’s Annual Shareholders’ Meeting held at Congress Center Rosengarten in Mannheim, Germany. Compared with the first quarter of 2018, income from operations (EBIT) before special items declined by €549 million to €1.7 billion. “As expected, this is primarily due to the considerably lower contributions from the Materials and Chemicals segments. In these segments, we had exceptionally high isocyanates margins and strong cracker margins in the first quarter of the previous year,” said Brudermüller. EBIT before special items also declined considerably in Other and the Nutrition & Care segment, while earnings matched the level of the previous first quarter in the Surface Technologies segment. By contrast, the Agricultural Solutions and Industrial Solutions segments recorded a considerable improvement in earnings.
Global economic growth in the first quarter of 2019 was shaped by geopolitical developments and trade conflicts, especially between the United States and China. The generally subdued market sentiment was reflected in the wait-and-see attitude of many customers. Consequently, BASF Group experienced weakening demand from key customer industries, especially the automotive sector.
Prices declined by 2% compared with the prior first quarter, which was attributable mainly to the businesses with isocyanates and cracker products. Higher prices in the Surface Technologies, Agricultural Solutions and Industrial Solutions segments could only partially offset the expected price decline in the Materials and Chemicals segments. Owing to the overall cautious ordering behavior of customers, sales volumes at the BASF Group were down by 4%. The sales growth was mainly driven by portfolio effects in the Agricultural Solutions segment resulting from the acquisition of significant businesses and assets from Bayer in August 2018. Currency effects also had a positive impact on sales in all segments.
At €26 million, special items in EBIT were positive overall in the first quarter of 2019, compared with minus €18 million in the prior-year quarter. Special income from divestitures in the Agricultural Solutions and Industrial Solutions segments exceeded integration costs, special charges from restructuring measures and other charges.
EBIT declined by €505 million compared with the first quarter of 2018 to €1.8 billion. Income before income taxes decreased by €520 million to €1.6 billion. The tax rate increased from 24.1% to 25.4%.
Income after taxes from continuing operations declined by €415 million to €1.2 billion. Income after taxes from discontinued operations, which comprise BASF’s oil and gas activities, rose by €97 million to €274 million. This was largely attributable to significant volumes growth, especially in Russia, as well as the suspension of depreciation and amortization since the recognition of the disposal group in the third quarter of 2018.
Net income declined by €273 million to €1.4 billion. Earnings per share amounted to €1.53 in the first quarter of 2019 (first quarter of 2018: €1.83). Earnings per share adjusted for special items and amortization of intangible assets amounted to €1.65 (first quarter of 2018: €1.93).
In the first quarter of 2019, cash flows from operating activities amounted to €373 million, €858 million below the figure for the prior-year quarter. Free cash flow declined from €604 million in the prior-year quarter to minus €368 million, mainly as a result of lower cash flows from operating activities.
Merger of Wintershall and DEA
Following the approval of all relevant authorities, BASF and LetterOne completed the merger of Wintershall and DEA on May 1, 2019. “With Wintershall Dea we create the leading independent European exploration and production company with international operations in core regions. By combining the two German-based entities, BASF and LetterOne lay the basis for strong profitable growth for Wintershall Dea,” said Dr. Hans-Ulrich Engel, Vice Chairman of the Board of Executive Directors of BASF SE, in a conference call on the first quarter 2019 results.
Proposed dividend of €3.20 per share
The Board of Executive Directors and the Supervisory Board proposed to the Annual Shareholders’ Meeting that the dividend be raised by €0.10 to €3.20 per share. “The BASF share thus offers an attractive dividend yield of 5.3% based on the 2018 year-end share price of €60.40,” said Brudermüller. Following the adoption of the relevant resolution by the Annual Shareholders’ Meeting, a total of €2.9 billion will be paid out to shareholders of BASF SE on May 8.
Outlook for 2019 confirmed
BASF’s expectations for the global economic environment in 2019 remain unchanged:
- Growth in gross domestic product: 2.8%
- Growth in industrial production: 2.7%
- Growth in chemical production: 2.7%
- Average euro/dollar exchange rate of $1.15 per euro
- Average Brent blend oil price for the year of $70 per barrel
BASF confirms the sales and earnings forecast for the BASF Group made in the BASF Report 2018 and expects slight sales growth as well as a slight increase in EBIT before special items, which is likely to be at the lower end of the range of 1% to 10%. Return on Capital Employed (ROCE) is expected to be slightly higher than the cost of capital percentage, with ROCE slightly lower than in 2018.