BASF sets yearly goals, forecasting a minimal profit during the spring season
In a shift that reflects wider sector challenges, the world's largest chemical company, BASF, has revised its annual operating targets for 2025 following weak performance in the first two quarters. The German giant reported a decline in sales and results in the first quarter, with revenues dropping by 2.1 percent to €15.77 billion.
The decline is attributed to negative currency effects in all segments and lower prices, particularly in the Chemicals division. Operating profit (EBITDA) before special items fell from €1.96 billion to €1.77 billion, and net profit after taxes and non-controlling interests plunged to €80 million from €430 million the previous year.
BASF cited significantly higher income taxes and reduced contributions from equity holdings as factors in the sharp profitability drop. Consequently, the company adjusted its EBITDA guidance for 2025 to a range of €7.3 billion to €7.7 billion, down from the previous forecast of €8.0 billion to €8.4 billion.
The decline in BASF's profits mirrors the challenges faced by Covestro, another major player in the plastics industry. Covestro reported an EBIT of 490 million euros in the first quarter, significantly below average analyst estimates. The company has also lowered its forecast for the year, citing persistent macroeconomic and geopolitical uncertainties, including US tariffs announced in early April, as the main reasons.
In the second quarter, Covestro provisionally reported revenues of around 15.8 billion euros, slightly above analyst consensus. However, the provisional operating result (EBIT) before special items was 810 million euros, significantly below the same period last year. Special items in EBIT for Covestro were mainly due to costs of savings programs.
The results for Covestro's segments were mixed. Agricultural Solutions significantly increased its result year-on-year. The Surface Technologies and Nutrition & Care segments reported slight increases in EBITDA before special items. However, the Materials segment saw a slight decline. Significantly higher tax expenses and lower contributions from equity investments are the main reasons for the decline in Covestro's profits.
The revisions in both BASF's and Covestro's annual operating targets can be linked to the ongoing macroeconomic and geopolitical uncertainties. Trade conflicts, alongside geopolitical tensions and macroeconomic uncertainty, have disrupted global supply chains and increased cost pressures, limiting growth prospects for large chemical companies. These factors contribute to cautious forecasts and pressure on earnings, as seen in BASF and other industry players like Covestro.
Both companies will publish their half-year financial reports in July. BASF will publish its half-year financial report 2025 on Wednesday, July 30. For free cash flow, BASF still expects a value between 400 million and 800 million euros. Covestro's result after taxes and non-controlling interests is expected to be 80 million euros, significantly missing analyst expectations.
In summary, the challenges faced by BASF and Covestro reflect wider sector headwinds, with trade conflicts playing a significant role in slowing growth and profitability in the chemical industry in 2025.
The revisions in BASF's and Covestro's annual operating targets are a result of the ongoing macroeconomic and geopolitical uncertainties, particularly trade conflicts, which have disrupted global supply chains and increased cost pressures, causing a slowdown in growth and profitability in the chemical industry, including finance sectors related to the industry. Both companies, involved in different divisions of the industry, have cited persisting macroeconomic and geopolitical uncertainties as the main reasons for their lowered forecasts, demonstrating a shared concern within the sector.
