- Sales growth of 16.3% to €23.0bn
- EBIT before special items of €2.3bn the level of prior-year quarter
- Net income of €2.1bn up 26.3% over prior-year quarter
- Cash flows from operating activities of €1.2bn below prior-year quarter (Q2 2021: €2.5bn)
- 2022 outlook for sales raised to between €86bn and €89bn and for EBIT before special items to between €6.8bn and €7.2bn
“Despite the continued high raw materials and energy prices, we again achieved strong earnings in the second quarter,” said Dr Martin Brudermüller, Chairman of the Board of Executive Directors of BASF SE, presenting the results for the second quarter of 2022 together with Chief Financial Officer Dr Hans-Ulrich Engel. BASF had already released preliminary figures on July 11.
The BASF Group increased sales by €3.2bnn compared with the prior-year quarter to €23.0bn. This rise of 16.3% was primarily due to the significant price increases that BASF was able to introduce in almost all segments.
At €2.3bn, income from operations (EBIT) before special items reached the level of the strong prior-year quarter. Agricultural Solutions and Nutrition & Care considerably increased earnings, while earnings in the Industrial Solutions segment rose slightly. EBIT before special items significantly improved in Other. By contrast, the Chemicals and Materials segments generated considerably lower EBIT before special items. In the Surface Technologies segment, EBIT before special items also declined significantly.
EBIT rose by €34M to €2.4bn. Income from operations before depreciation, amortisation and special items (EBITDA before special items) rose by €76M to €3.3bn and EBITDA increased by €197M to €3.4bn in the second quarter of 2022.
Development of cash flows in the second quarter of 2022
Cash ﬂows from operating activities amounted to €1.2bn in the second quarter of 2022, a decrease of €1.3bn compared with the prior-year quarter. Free cash ﬂow amounted to €336M in the second quarter of 2022, after €1.8bn in the second quarter of 2021.
Sales in the Chemicals segment rose considerably by 27.2% compared with the second quarter of 2021 to reach €4.3bn. Both operating divisions contributed to the increase. Sales growth was primarily driven by significantly higher prices in both divisions, mainly due to the passing on of increased prices for raw materials and energy amid continued strong demand. EBIT before special items of €853M remained at a high level but was considerably below the exceptionally strong earnings in the prior-year quarter. This was primarily due to considerably lower earnings in the Petrochemicals division, mainly from higher fixed costs as a result of the increase in energy prices and currency effects.
The Materials segment increased sales considerably by 29.9% compared with the prior-year quarter to €4.9bn. This was primarily the result of strong sales growth in the Monomers division. The Performance Materials division also recorded a considerable increase. The positive sales performance was mainly due to significantly higher prices from passing on the increase in raw materials prices. At €668M, EBIT before special items decreased considerably compared with the second quarter of 2021. In both divisions, higher margins were unable to offset the increase in fixed costs.
Sales in the Industrial Solutions segment rose considerably compared with the second quarter of 2021 and amounted to €2.6bn. This represents an increase of 12.1%, which was mainly driven by strong sales growth in the Performance Chemicals division. The Dispersions & Resins division recorded a slight sales increase. The sales increase was primarily due to significantly higher price levels across all business areas and in all regions. This was largely the result of higher prices for raw materials, energy and freight. At €323M, the segment’s EBIT before special items was slightly above the prior-year quarter. This reﬂected the significant rise in earnings in the Performance Chemicals division, primarily from price-driven margin growth.
In the Surface Technologies segment, sales of €5.4bn were 7.6% below the prior-year quarter. Considerable sales growth in the Coatings division was unable to offset the strong decline in the Catalysts division. The year-on-year sales decrease was primarily due to significantly lower volumes in the Catalysts division. This was mainly the result of weaker demand from the automotive industry due to insufficient semiconductor supply and the lockdowns in China. EBIT before special items of €227M declined considerably from the €289M reported in the second quarter of 2021. This was attributable to the considerable decline in the Coatings division’s EBIT before special items, mainly due to higher fixed costs.
BASF Group outlook for 2022
The assessment of the global economic environment in 2022 was adjusted as follows (previous assumptions from the BASF Report 2021 in parentheses; current growth assumptions are rounded):
- Growth in gross domestic product: +2.5% (+3.8%)
- Growth in industrial production: +3.0% (+3.8%)
- Growth in chemical production: +2.5% (+3.5%)
- Average euro/dollar exchange rate of US$1.07 per euro (US$1.15 per euro)
- Average annual oil price (Brent crude) of US$110 per barrel (US$75 per barrel)
For the second half of the year, BASF anticipates a gradual cooling of economic development globally, but much more pronounced in Europe. This assumes that there are no severe restrictions resulting from new lockdowns in China and that natural gas shortages do not lead to production shutdowns in Europe.
Based on the very positive business development in the first half of 2022 and the above assumptions, the forecast for the BASF Group for the 2022 business year was adjusted as follows (previous forecast from the BASF Report 2021 in parentheses):
- Sales growth to between €86bn and €89bn (between €74bn and €77bn)
- EBIT before special items of between €6.8bn and €7.2bn (€6.6bn and €7.2bn)
- Return on capital employed (ROCE) of between 10.5% and 11.0% (between 11.4% and 12.6%)
- Reduction in CO2 emissions to between 18.4M metric tons and 19.4M metric tons (between 19.6M metric tons and 20.6M metric tons)
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 presented above. In particular, risks could arise from production stoppages at major European sites as a result of further restrictions to European gas supplies from Russia. In this case, the loss of European capacities could be partially compensated for by higher plant capacity utilisation at sites outside of Europe. Further risks could arise from the future course of the coronavirus pandemic and new measures to contain the number of infections. Opportunities could arise from continued high margins, even in the case of an economic slowdown. BASF is responding to the economic slowdown with cost reduction measures.