BASF Warning Drags Down Chemical Stocks
July 09 2019 - 4:33AM
Dow Jones News
By Nathan Allen
Shares in BASF SE (BAS.XE) fell sharply Tuesday after the German
chemical company issued a severe profit warning, weighing down the
broader sector.
BASF blamed a slowdown in the global automotive industry and the
prolonged trade conflict between China and the U.S. for its
troubles, while adverse weather conditions in the U.S. also hit
demand for agricultural products.
The company expects second-quarter earnings before interest and
taxes of around 500 million euros ($560.9 million), more than 60%
below consensus expectations, according to Baader Helvea. For the
full year, BASF expects EBIT before special items to decline by
30%, compared with a previous estimate for growth of between 1% and
10%.
At 0725 GMT shares were trading 5.3% lower at EUR59.29, while
fellow industrial-chemical producers Covestro AG (1COV.XE) and
Wacker Chemie AG (WCH.XE) both fell more than 5%. The chemical
industry was the worst-performing sector on the Stoxx Europe 600,
slipping 1.6%.
While several analysts had questioned BASF's ability to hit its
ambitious earnings targets, the scale of Monday's warning came as a
surprise.
Bernstein analyst Gunther Zechmann said the warning was worse
than feared and predicted more pain to come in the second half.
Meanwhile, Citi's Thomas Wrigglesworth said the warning raises
concerns that capital-expenditure plans may be cut, and called upon
BASF's management to present a detailed plan to return to
growth.
Write to Nathan Allen at nathan.allen@dowjones.com
(END) Dow Jones Newswires
July 09, 2019 04:18 ET (08:18 GMT)
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