- BASF's revenue grew three percent in the second quarter.
- Cash generation in the second quarter and H1 is very strong.
- BASF continues to invest for a strong future outlook.
- BASF remains cheap in comparison to its peers and the broad market.
Disclaimer: Numbers reported in euros were converted to US dollar at a rate of 1.11.
BASF (OTCQX:BASFY), the world's largest chemical company, reported second quarter and H1 results recently. The company saw some struggles in its business, but the long-term outlook remains good and BASF continues to trade at a huge discount to its peers.
In the second quarter BASF grossed revenues of $21.2 billion, up three percent over the prior year. EBITDA grew 11 percent to $3.3 billion, EBIT grew five percent to $2.2 billion. Reported earnings per share grew slightly (one percent) to $1.53 (adjusted earnings per share were $1.65). Sales volume increased two percent in the second quarter.
BASF's cash generation saw a huge boost. Cash from operations increased by an immense 185 percent to $3.1 billion. This is in line with the first quarter, where BASF saw a huge boost to operating cash flows as well. The H1 operating cash flow was $5.7 billion.
In the second quarter BASF continued to invest heavily into its business (investments increased from $1.3 billion to $1.7 billion). The company opened its first world-scale acrylics plant in Brazil, a new chemicals plant in China and a new agricultural research station in India. BASF also made several divestments. The company also sold some oil and gas assets on the Norwegian continental shelf.
When we look at BASF's divisions, we see that the Chemicals segment saw an eight percent sales decline (mostly because Petrochemicals sales decreased 18 percent, Intermediates grew five percent), Performance Products saw a four percent sales increase (on strong Nutrition and Health (+seven percent) and Performance Chemicals (+six percent) growth), and Functional Materials and Solutions saw a nine percent increase (with Construction Chemicals showing the highest growth rate at 16 percent).
Agricultural solutions sales grew one percent in the second quarter and eight percent in the first half year. BASF's Oil and Gas segment saw sales growth of 15 percent (due to higher gas trading revenues), but earnings from O&G decreased due to lower exploration and production profits (which were negatively affected by lower oil prices).
All in all results were mixed. Revenues grew but margins were lower which lead to flat earnings. BASF's very strong cash generation so far this year is a huge plus. As commodity prices are weak, flat earnings are not too bad, and with BASF's ongoing investments the company should profit once prices rise again.