BASF warning drags down chemical stocks

| July 9, 2019

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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.

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