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BASF lifts revenue outlook, warns of risks from lower gas supplies
Global Banking & Finance Review®
Company
By Ludwig Burger
FRANKFURT (Reuters) – BASF on Wednesday lifted its guidance for full-year revenue as it continues to pass on higher raw material and energy prices to customers, but it flagged production outage risks in Europe if Russian gas supplies drop further.
The major chemicals maker also said the effects of the war in Ukraine and any further measures to contain the spread of COVID-19 might force it to review its outlook.
The German group added that 2022 sales would be between 86 billion and 89 billion euros ($87-90 billion), up from a previous target range of 74 billion to 77 billion euros.
“Current developments, mainly driven by the war in Ukraine and its impact on energy and raw materials prices and the availability of raw materials, especially in Europe, may lead to additional headwinds, deviating from the assumptions,” the company said.
Specifically, it flagged the risk of production stoppages at its European sites as a result of further restrictions to European gas supplies from Russia, which could be partially offset by higher capacity utilization at sites outside Europe.
BASF, which released unscheduled preliminary first-quarter earnings this month, said it is also targeting earnings before interest and tax (EBIT) adjusted for special items of between 6.8 billion and 7.2 billion euros, lifting the lower bound of the target range from 6.6 billion previously.
That was down from 7.8 billion euros reported for last year.
BASF said on July 11 that its operating income in the second quarter came in significantly above analyst expectations as it passed on higher raw material costs and benefited from a strong dollar.
($1 = 0.9852 euros)
(Reporting by Ludwig Burger; Editing by Maria Sheahan and Uttaresh.V)
EBIT stands for Earnings Before Interest and Taxes, a measure of a firm's profitability that excludes interest and income tax expenses.
Raw material prices are the costs associated with the basic materials used in the production of goods, which can significantly affect overall production costs.
A production outage is a temporary halt in manufacturing operations, often due to supply chain disruptions or equipment failure.
Capacity utilization is the percentage of potential output levels that is actually being achieved in manufacturing or production.
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