Company Reports

BASF's capital markets day featured the company's plan to divest multiple businesses. These include surface technologies and agricultural solutions, which combined to generate nearly 40% of total revenue in 2023. We think the move makes strategic sense, allowing for a more focused capital allocation strategy.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less. BASF is fairly vertically integrated, manufacturing many chemicals that serve as inputs to its other segments.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.

Narrow-moat BASF marginally missed our top-line expectations, but completely missed on the bottom-line during second-quarter results. Therefore, we reduce our fair value estimate to 60 EUR from 62 EUR previously, and to $16 from $17 for the ADRs. That said, we still model a recovery following a period of heavy inventory destocking that weighed heavily on last year’s results. Over the long term, we expect higher volumes should allow the firm to run its plants at higher capacity utilization, particularly in nutrition and health. Further, we continue to expect comparisons will get easier for the firm as the year unfolds, though we’re not baking in a full restocking. We think the stock looks attractive on a risk/reward basis for the most patient investors.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.

Following inventory destocking that weighed heavily on 2023 profits, BASF reported solid results for the first quarter of 2024. Volume excluding metals trading rose 2% versus the prior-year quarter, a much-improved result versus the 12% volume decline for full-year 2023. The results were in line with our view that BASF will see a profit rebound in 2024 as slightly higher volume allows the company to run its plants at a higher capacity utilization, taking advantage of the Verbund process (the physical integration of production, market platforms, and technologies that tie the businesses together) that underpins our narrow moat rating based on a cost advantage.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in over two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.

BASF's fourth-quarter results show the continued challenge of weak chemicals demand due to customer inventory destocking, as adjusted operating profits fell nearly 22% versus the prior-year quarter. However, during the quarter, volumes were down less than 1% year over year and segment operating profits grew in all businesses except chemicals and agricultural solutions. This shows that demand is returning, which is in line with our thesis that BASF's profits will improve in 2024. After our initial earnings review, we're maintaining our EUR 62 ($16) fair value estimate. Our narrow moat rating is also unchanged.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in more than two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. Its catalysts business represents about 20%-25% of annual revenue, and the remaining 12 business lines each account for roughly 10% or less.

Narrow-moat BASF posted third-quarter results that reflect continued challenges from a sluggish global macroeconomic environment, as demand across end markets and geographies remains suppressed. Total sales declined 28% year over year and 9% sequentially, while firmwide EBITDA margin contracted 160 and 240 basis points over the same periods, respectively. Repressed volume demand and unfavorable pricing dynamics were key hindrances this quarter, exacerbated by unplanned downtime for two crackers in September.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in more than two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. Its catalysts business represents about 20%-25% of annual revenue, and the remaining 12 business lines each account for roughly 10% or less.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in more than two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. Its catalysts business represents about 20%-25% of annual revenue, and the remaining 12 business lines each account for roughly 10% or less.

BASF’s second-quarter results reflected depressed demand across end markets with total revenue declining 25% year over year and 13% sequentially. The firmwide adjusted EBITDA margin contracted to 6% due to reduced product pricing and lower fixed cost absorption, which we expect will continue to weigh on profitability through year-end. Management indicated customer inventories of commodity chemicals have depleted enough to spur modest demand recovery in the second half, but demand for more specialized products (such as consumer goods) will likely remain depressed through year-end. We’ll incorporate the firm’s full financial and operating results shortly, but after this first look, we maintain our narrow moat rating and EUR 65 ($18) fair value estimate.

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in more than two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. Its catalysts business represents about one quarter of annual revenue, and the remaining 12 business lines each account for 10% or less.

BASF’s first-quarter results reflected low demand across nearly all its end markets worldwide, reflecting an overall challenging global macroeconomic backdrop. First-quarter revenue came in just shy of EUR 20 billion, a 13% year-over-year decrease mostly driven by reduced sales volumes. The prevailing operating environment also contributed to a nearly EUR 1 billion year-over-year decline in the firmwide operating profits, yielding a 9.6% operating margin for the quarter. We’ll incorporate the firm’s full financial results shortly, but after this first look, we maintain our narrow moat rating and fair value estimate of EUR 65 ($17).

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major chemical category. The firm maintains a top-three market position in more than two thirds of its businesses. The company’s products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. Its catalysts business represents about one quarter of annual revenue, and the remaining 12 business lines each account for 10% or less.

BASF posted a decent fiscal 2022, as the firm grappled with myriad macroeconomic headwinds including input cost inflation and reduced product demand around the world. Though some of the current market dynamics will likely persist in 2023, we expect much of these challenges will abate in the long run, especially as BASF makes headway on several initiatives targeting operational efficiency gains. We’re therefore raising our fair value estimate to EUR 65 ($17) from EUR 59 ($15), mostly due to our improved outlook for the firm’s profitability over the next five years. We maintain our narrow moat rating and stable moat trend following results.