Chemical company BASF raises outlook but warns on Iran war risks
BASF’s Financial Performance and Market Outlook
By Simon Ferdinand Eibach and Patricia Weiss
Second-Quarter Results and Earnings Highlights
July 15 (Reuters) - German chemical giant BASF raised its 2026 earnings outlook on Wednesday after reporting better-than-expected second-quarter results, but warned of uncertainty over the Iran war and the outlook for shipping via the Strait of Hormuz.
The company reported preliminary second-quarter earnings before interest, tax, depreciation, amortisation and special items of €2.4 billion ($2.8 billion), above analyst expectations of €2.1 billion, benefiting from substantial price rises and higher demand.
Net Income and Sales Growth
Net income surged to €4.1 billion from €79 million a year earlier, driven primarily by a €3.9 billion gain from the sale of its industrial coatings business to financial investor Carlyle. Second-quarter sales also rose 16%.
Division Performance
However EBITDA before special items at its Chemicals and Surface Technologies division came in "significantly below the average analyst estimates for the respective segments", it said.
Updated Forecasts and Economic Uncertainties
The company changed its EBITDA forecast range for this year to €6.9 billion to €7.7 billion from €6.2 billion to €7.0 billion.
But it warned that the outlook for the global economy and regional chemical markets in the second half remained highly uncertain.
Geopolitical Risks
"It depends to a considerable degree on the outcome of the negotiations between the United States and Iran, particularly with regard to the access to and use of the Strait of Hormuz," it said in a statement.
Market Reaction and Analyst Commentary
Share Price Movement
SHARES FALL
BASF shares were down 4% at 1113 GMT, underperforming Germany's blue-chip index DAX, which was down 0.9%.
Analyst Insights
"Investors may be focusing on the EBITDA miss in the chemicals segment, the recent declines in prices of several commodity chemicals, and the H2 EBITDA run-rate implied by the new guidance," said Berenberg research analyst Sebastian Bray.
"It could be that investors view the pre-release as backward looking, driven by peak chemicals prices that are often no longer present."
Industry Challenges and Future Expectations
Free Cash Flow and Oil Price Forecast
For free cash flow, which rising raw material prices caused to slip into negative territory in the second quarter, BASF continues to expect a range of €1.5 billion to €2.3 billion in 2026.
It now anticipates an average oil price of $80 per barrel this year, up from the previously estimated $65.
Industry-Wide Crisis
Cost Pressures and Job Cuts
The chemicals industry remains in crisis due to high energy costs and weak underlying demand. Companies such as BASF, Evonik and Lanxess are making drastic cutbacks and cutting thousands of jobs to remain competitive.
($1 = 0.8757 euros)
(Reporting by Simon Ferdinand Eibach; additional reporting by Kira Britten, editing by Matthias Williams and Jan Harvey)
