BASF warns of lower-than-expected earnings
1/27/2016 12:00:00 AM
By Victoria Bryan and Maria Sheahan
Reuters
BASF announced a 600-million-euro ($653 million) charge for the fourth quarter citing low oil prices and warned of lower-than-expected 2015 earnings, sending its shares lower on Wednesday.
BASF announced a 600-million-euro ($653 million) charge for the fourth quarter citing low oil prices and warned of lower-than-expected 2015 earnings, sending its shares lower on Wednesday.
Low oil prices, normally a boon to chemical companies, hurt BASF's oil and gas business Wintershall, which accounted for 20% of its 2014 sales.
A global oil glut has pushed prices to 12-year lows and forced energy companies to rein in spending.
The world's largest chemicals company by sales, BASF joins others such as Shell and Austria's OMV in announcing a writedown.
Benchmark Brent crude oil futures have fallen to around $30/bbl from $115 in June 2014 amid a glut in supply.
BASF, whose products also include coatings, foam chemicals, catalytic converters and mining chemicals, forecast an 18% drop in 2015 earnings before interest and tax (EBIT) would come to 6.2 billion euros ($6.7 billion).
Last October it had warned of a slight decrease and said at the time that weak demand and plunging currencies in markets such as China and Brazil were hurting business.
BASF shares were down 2.8% to 60.36 euros at 0827 GMT, the biggest decliners on Germany's blue-chip index, which was down 0.3%.
NordLB cut its price target on BASF to 64 euros from 78 euros but kept its "hold" rating citing BASF's above-average dividend yield.
BASF said it expected oil and gas prices to remain at low levels in 2016 and it had cut its assumptions for subsequent years, forcing it to take the impairment in the fourth quarter of 2015 in its oil and gas division.
Credit rating agency Moody's last week slashed its forecast for 2016 average Brent prices to $33/bbl from $43 and placed more than 100 energy-related companies on review for downgrade.
BASF said its 2015 sales fell by 5% to 70.4 billion euros and EBIT before special items was down 8% at 6.7 billion euros, in line with its guidance.
It is due to report full results on Feb. 26.
($1 = 0.9209 euros) (Editing by Subhranshu Sahu and Jason Neely)
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