Morningstar | BASF Profits Down As Expected in 1Q; Shares Fairly Valued
Narrow-moat BASF reported first-quarter EBIT of EUR 1.7 billion, down 24% over the year-ago period, which was broadly in line with expectations. Volumes were down 4% for the group given generally subdued market sentiment, which led to cautious ordering by customers, particularly in the automotive sector. Chemicals and materials led the charge downward because of the current current oversupplied markets in isocyanates and cracker products. 2019 guidance was maintained for a slight increase in EBIT. We don’t expect to make a material change to our forecast or EUR 74 fair value estimate. At current levels, the shares look fairly valued.Industrial solutions and agricultural solutions were the strong performers in the quarter. Agricultural solutions benefited mostly from the portfolio effects of the Bayer acquisition, while industrial solutions was able to generate better profits through increased prices.
In the surface technologies segment, catalysts reported strong sales growth, while EBIT increased considerably in construction chemicals. With construction chemicals on the block for divestment, the latest strong performance will support the ultimate sale price. Profits for the coatings business fell considerably, mainly attributable to the weaker automotive business.
In the nutrition and care segment, earnings in nutrition and health were down because of lower margins in the animal nutrition business. However, this was offset by improved performance in care chemicals.
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