Strong start to 2021 business year for Basf

“We were able to carry over the tailwinds from the strong fourth quarter of 2020 into the first quarter of 2021,” said Martin Brudermüller, Chairman of the Board of Executive Directors of Basf, expressing one of the core messages to shareholders at this year virtual annual shareholders meeting. “Basf had a strong start to the year 2021.”

Basf increased sales by 2.6 billion euros compared with the first quarter of 2020 to 19.4 billion euros. This was mainly due to higher prices and volume growth. Compared with the same quarter of the prior year, income from operations (Ebit) before special items rose by 42% to 2.3 billion euros. This was primarily attributable to considerably higher earnings contributions from the Materials and Chemicals segments. The Surface Technologies segment also recorded considerable earnings growth thanks to the recovery in automotive production. All regions contributed to the considerable increase in the Basf Group’s earnings in the first quarter of 2021. Ebit rose by 855 million euros compared with the first quarter of 2020 to 2.3 billion euros. Income from operations before depreciation, amortization and special items (Ebitda before special items) increased by 602 million euros to 3.2 billion euros and Ebitda rose by 748 million euros to 3.2 billion euros in the same period.

Compared with the first quarter of 2020, sales in the Chemicals segment rose considerably by 16% to 2.7 billion euros. Both divisions posted higher sales, primarily due to significantly higher price levels. Sales volumes increased significantly as well. Ebit before special items amounted to 558 million euros. It rose considerably compared with the first quarter of 2020 in both divisions, especially in the Petrochemicals division. Earnings development in both divisions was driven by higher margins as a result of a recovery in demand, an improvement in income from equity-accounted companies, and lower fixed costs.

In the Materials segment, sales rose by 20% to 3.4 billion euros, considerably higher than in the prior-year quarter. The sales increase was mainly attributable to significantly higher prices and volumes. Ebit before special items rose considerably to 672 million euros. This was mainly driven by a significantly higher earnings contribution from the Monomers division due to improved isocyanate margins on the back of higher prices.

Early economic indicators have risen over the past few months, signaling a stronger recovery in macroeconomic activity than Basf previously assumed. However, the renewed rise in infection rates in many countries and ongoing restrictions on economic activity mean that the economic situation is still extremely fragile. In addition, disruptions to global supply chains could temporarily impact industry growth. Against this background, the assumptions presented in the Basf Report 2020 for growth in global gross domestic product and industrial and chemical production have been raised moderately. Expectations for oil prices have also been revised. Based on the development of sales and earnings in the first quarter of 2021, the stronger-than-expected recovery of the global economy and much higher raw materials prices than planned, the forecast for the Basf Group presented in the asf Report 2020 was revised as follows (previous forecast from the Basf Report 2020 in parentheses): sales growth to between 68 billion euros and 71 billion euros; Ebit before special items of between 5 billion euros and 5.8 billion euros; Return on capital employed (ROCE) of between 9.2 and 11%.

The market environment continues to be dominated by a high level of uncertainty. Risks could arise if restrictions on macroeconomic activity continue for longer than expected as a result of measures to fight the coronavirus pandemic. Opportunities could arise from a faster vaccination rate and a more rapid recovery of the economy as a whole, as well as a continuation of the positive margin trend.