Stable dividend: BASF expects strong recovery

Dividend stable
BASF expects a strong recovery

The chemical industry, with its prime BASF, is an indicator of the economy. And the group is forecasting solid growth. However, the company is still vague about the exact amount.

The chemical giant BASF is aiming for significant growth again after the profit slump in the past Corona year. However, CEO Martin Brudermüller remains cautious and sets goals for the Ludwigshafen-based group that leave a lot of leeway. "For 2021, we expect the global economy to recover from the severe slump as a result of the corona pandemic. However, the uncertainties about further developments remain exceptionally high," he said.

BASF 68.70

Sales are expected to rise to between 61 billion and 64 billion euros in the current year, which would be an increase of up to eight percent. The adjusted operating profit (EBIT) is expected to climb to 4.1 billion to 5.0 billion euros, an increase of 14 to 39 percent. Brudermüller said that with the broad forecast range, BASF was taking into account the risk of renewed interruptions in global supply chains and the associated negative consequences for the global economy. "However, we are confident that without such negative effects we can generate a result that is at the upper end of our forecast range."

Brudermüller assumes that the automotive industry in particular, BASF's most important customer group, should grow significantly. Other customer industries are also likely to grow. Global chemical production is expected to achieve growth of 4.4 percent, well above the previous year's level.

The subsidiary Wintershall Dea goes public in the second half of the year

In 2020, the economic consequences of the pandemic had a heavy burden on the group. BASF suffered the most from the drop in demand from the auto industry. But incoming orders were already recovering at the end of the year. BASF was able to increase its earnings by almost a third in the final quarter. The chemical industry and, with it, the industry leader, BASF, are considered to be an important economic indicator, as their products are required in all major branches of industry.

BASF had already published preliminary business figures at the end of January, as the group performed significantly better in the fourth quarter than analysts expected. In 2020, sales of 59.1 billion euros were almost at the previous year's level, while the adjusted operating profit fell by 23 percent to 3.6 billion euros. After taxes, the oil and gas company Wintershall Dea, in which BASF has a 67 percent stake, incurred a loss of 1.06 billion euros, primarily due to high, already known value adjustments.

Wintershall Dea is expected to go public in the second half of the year, as CFO Hans-Ulrich Engel said. The walk to the floor, which was actually planned for 2020, had been called off due to the Corona crisis.

BASF shareholders are doing a little better than expected. They are to receive an unchanged dividend of 3.30 euros per share – analysts, on the other hand, had expected a decline on average. For the first time since 2009, however, the distribution will not be increased. The group has actually set itself the goal of increasing its dividend annually based on strong free cash flow. But BASF wants to adhere to this in principle, said Engel: "We have made a commitment, we make an effort and we adhere to this commitment." CEO Brudermüller added that BASF could "continue to pay high dividends up front".

. (tagsToTranslate) Economy (t) BASF (t) Wintershall (t) IPOs (t) Dax companies (t) Quarterly figures (t) Corona crisis (t) Chemical industry