GuruFocus -
- Sales: EUR15.7 billion, matching the prior-year quarter.
- Volume Growth: 7% increase excluding precious and base metals.
- Currency Impact: Sales growth dampened by 3% due to currency headwinds.
- EBITDA Before Special Items: EUR1.6 billion, a 5% increase.
- EBITDA Margin Before Special Items: Increased from 9.8% to 10.3%.
- EBIT Before Special Items: EUR635 million, a 10% increase.
- Net Income: EUR287 million compared to minus EUR249 million in Q3 2023.
- Cash Flows from Operating Activities: Decreased by EUR633 million to EUR2.1 billion.
- Free Cash Flow: EUR569 million compared to EUR1.5 billion in Q3 2023.
- Total Assets: EUR79.4 billion, a decrease of EUR3.2 billion.
- Net Debt: Increased to EUR19.7 billion from EUR18.9 billion.
- Equity Ratio: 45.4% at the end of September 2024.
- Cost Savings Program: Achieved a cost reduction run rate of around EUR800 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BASF SE (ETR:BASFN) (BASFY) reported a 5% increase in EBITDA before special items, reaching EUR1.6 billion, driven by higher volumes and margins in core businesses.
- The Chemicals segment saw strong volume growth and increased specific margins, particularly in the Petrochemicals division.
- The Materials segment benefited from higher volumes and significant margin increases, especially in the Monomers division.
- The Industrial Solutions segment achieved significant volume growth and improved margins, particularly in the fuel and lubricants, coatings, and semiconductor industries.
- The Agricultural Solutions segment achieved strong volume growth in fungicides, seeds, traits, and insecticides, despite challenges in specific margins.
- Currency headwinds, particularly from the Argentinian peso and Brazilian Real, dampened sales growth by 3%.
- The Surface Technologies segment experienced a decline in volumes and EBITDA due to lower volumes in the Catalysts division.
- Global automotive production declined by more than 5% in Q3, negatively impacting the Surface Technologies segment.
- The Agricultural Solutions segment faced considerably lower specific margins due to lower prices, especially in South America.
- Cash flows from operating activities decreased by EUR633 million to EUR2.1 billion, mainly due to lower cash inflows from changes in net working capital.
A: Dirk Elvermann, CFO, explained that despite typical volatility in Q4, BASF expects to reach the low end of their guidance range. The company has seen progress in cost improvement programs and stable volumes, with some uncertainty due to customer inventory management and presales in the agricultural business. The impact from the Nutrition & Health division's force majeure is also expected to be more pronounced in Q4.
Q: How does the shift in automotive production from the US and Europe to China affect BASF's coatings business and polyamide businesses?
A: Markus Kamieth, Member of the Board of Executive Directors, stated that regional shifts in automotive production do not significantly impact BASF due to their global presence and assets in all major production areas. The overall production volume trajectory is more concerning, as Q3 momentum was not favorable, and Q4 is expected to be challenging.
Q: What is the outlook for automotive demand into 2025, and what are the FX and trading conditions for agricultural solutions in Q4?
A: Markus Kamieth noted that while industry experts project slight growth in automotive demand for 2025, the outlook remains uncertain. The performance of the Chinese market before and after the Chinese New Year will be a key indicator. Dirk Elvermann added that FX effects have been a burden on the agricultural business and are expected to continue, with no tailwind anticipated for the rest of the year.
Q: Can you quantify the impact of increased fixed costs related to the new site in China on the chemicals division?
A: Dirk Elvermann stated that the fixed cost burden for the Zhanjiang site in 2024 is a low triple-digit million euro amount, with approximately EUR100 million per quarter expected in 2025. Depreciation will start as the site comes online, but specific figures were not provided.
Q: Why does BASF expect Q4 to be better than Q3 in terms of EBITDA, and how does the ag business handle FX impacts?
A: Markus Kamieth explained that the core businesses have shown favorable earnings momentum with volume growth and margin expansion. Despite challenges, margins are holding up well. Dirk Elvermann noted that the agricultural division is working on a stronger Q4, with strong volumes but weak prices, and FX effects are a significant factor.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.