Sector News

BASF and Dow see early coronavirus impacts in first-quarter earnings

May 1, 2020
Chemical Value Chain

First-quarter earnings at chemical giants BASF and Dow show the early impact of the novel coronavirus as it slowed sales to industry—first in China and then in Europe and the US.

Business units such as polymers and coatings that serve auto manufacturing were hardest hit as car plants temporarily shut down. What’s more, the cratering cost of oil weighed on prices the firms could command for petrochemicals.

The global pandemic had an uneven effect. For example, sales of ingredients for pharmaceuticals, detergents, food, and food packaging were strong as consumers boosted spending on day-to-day consumables.

“The first quarter of 2020 was not a normal quarter,” said BASF chairman Martin Brudermüller in an earnings presentation. “The same will be true for the second quarter and likely for the entire year.”

BASF reported earnings of $1.3 billion, an 18% decline compared with the year-earlier quarter, though overall sales rose slightly. Low profit margins took a big bite out of earnings from ethylene and propylene derivatives, isocyanates, nylon precursors, and other monomers. BASF saw auto demand for coatings fall 11%.

Meanwhile, earnings from BASF’s nutrition and care ingredients grew 14%. Sales of seeds and agricultural chemicals were higher, thanks to early demand from farmers.

At Dow, earnings were down 40%, to $439 million, versus pro forma results from the first quarter of 2019. Sales dropped 11% because of low crude prices, which hurt revenues from hydrocarbons, polyurethanes, and construction chemicals. Dow also saw a decline in demand for materials used in furniture, autos, and appliances, particularly in China.

Bottom of Form

Dow says it will trim $750 million from capital spending this year and cut operating expenses by $350 million. At BASF, members of the supervisory board and board of directors decided to cut their fixed compensation 20%.

Neither Dow nor BASF offered a 2020 forecast, but Dow CEO Jim Fitterling sounded optimistic in his note to shareholders. “Assuming a gradual and sustainable return of global economic activity and reopening of economies in May and June, we expect a recovery will begin to take hold as the year progresses,” he wrote.

By: Melody M. Bomgardner

Source: Chemical & Engineering News

Related News

October 24, 2020

Johnson Matthey completes new plant in China for fuel-cell components

Chemical Value Chain

Johnson Matthey is expanding its fuel cell operations into China with a £7.5-million facility to manufacture critical components for customers in the region.

October 24, 2020

Borealis commissions naphtha-storage cavern in Finland

Chemical Value Chain

Having invested around EUR 25 million in the construction of this 80,000-m3 facility, Borealis can now source and store naphtha for its Porvoo operations from the global market in a more flexible, cost-efficient, and secure way.

October 24, 2020

Mitsubishi Chemical names non-Japanese national as next CEO

Chemical Value Chain

Mitsubishi Chemical Holdings, Japan’s largest chemical maker, has named Jean-Marc Gilson, CEO of plant-ingredients maker Roquette Frères (Lestrem, France), as its next CEO, effective 1 April 2021.

Send this to a friend