Chemical Week • November 4/11 • Tough market conditions stifle earnings in Europe

Leading Europe-based companies delivered third-quarter financial results that reflect the challenging market conditions in which they are operating. Earnings were generally below analysts’ expectations, although there were some notable beats, and a number of firms were prompted to downgrade their full-year forecasts. As a result, the outlook for sales and profits next year remains uncertain.

BASF SE said it expects 2024 EBITDA before nonrecurring items at the low end of its guidance range of €8.0 billion-€8.6 billion after the company’s third-quarter EBITDA before special items — up 5% year over year, to €1.62 billion — missed a company-compiled analysts’ consensus estimate of €1.67 billion.

Earnings were supported by “significantly” higher contributions from BASF’s designated core businesses, the company said. The increase was partially offset by a “considerable” earnings decline in the company’s standalone businesses, it said.

“The positive earnings momentum in our core businesses was already visible in the first half of 2024 and continued in the third quarter, driven by higher volumes and margins,” said BASF Chairman Markus Kamieth.

BASF’s third-quarter EBITDA margin before nonrecurring items was 10.3%, up from 9.8% in the prior-year period.

Sales were level with the third quarter of 2023, at €15.7 billion, with volume growth in almost all segments, BASF said. Only the surface technologies segment recorded a decline in volumes in the catalysts division due to weak demand in the automotive market, it said. Negative currency effects and lower prices in almost all segments hampered the company’s sales performance.

Net profit reached €287 million in the third quarter, swinging from a net loss of €249 million in the prior-year period.

Air Liquide SA maintained its sales guidance because of contributions from new production unit startups, and it flagged strengthening industrial gases demand in the US chemicals sector. The company posted third-quarter group revenue of €6.76 billion, down 0.7% year over year and just missing analysts’ consensus estimate of €6.78 billion, as provided by S&P Capital IQ.

Air Liquide increased its sales and demonstrated the resilience of its business model “in a difficult market environment,” said CEO François Jackow.

Evonik Industries AG maintained its full-year earnings guidance after swinging back to net profit in the third quarter on higher revenue and sales volumes.

Quarterly net profit of €223 million reversed year over year from a net loss of €96 million, but missed the consensus of €238 million, as provided by S&P Capital IQ. Sales of €3.83 billion rose 2% compared with the prior-year period and were also below the consensus of €3.91 billion. Selling prices remained “broadly unchanged” during the quarter, and sales volumes increased 5%, the company said.

Evonik confirmed its outlook for full-year adjusted EBITDA of between €1.9 billion and €2.2 billion and sales of between €15 billion and €17 billion. The company said that its ongoing cost-saving programs had supported earnings and margins in the third quarter and were expected to continue doing so next year.

Evonik Chairman Christian Kullmann called the company’s earnings performance “all the more remarkable given that the economic crisis is blowing a cold headwind in our faces.”

Covestro AG trimmed its earnings guidance on slightly weaker anticipated operating profit in its two main business segments despite returning to profit in the third quarter after four consecutive quarterly net losses.

The company reported third-quarter net income of €33 million, reversing from a net loss of €31 million a year earlier, on sales that ticked 1% higher, to €3.6 billion. The net earnings confounded analysts’ consensus estimate of a €15.4 million net loss, as provided by S&P Capital IQ. EBITDA rose 3.6%, to €287 million, also beating the consensus, due mainly to growth in sales volumes, Covestro said.

The company is now forecasting full-year EBITDA of between €1.0 billion and €1.25 billion, cut at the upper end of its previous guidance of up to €1.4 billion.

“We concluded the third quarter of the year with higher sales volumes and improved earnings. Nevertheless, the current market environment remains challenging,” said Markus Steilemann, CEO of Covestro.

DSM-Firmenich AG was one of the few companies to beat estimates and raise its guidance. The company increased its full-year adjusted EBITDA forecast to about €2.1 billion from “at least” €1.9 billion mainly because of a “significant” one-time profit contribution of about €80 million that the company anticipates in the fourth quarter due to an increase in the prices of some vitamins.

DSM-Firmenich posted a 7% year-over-year rise in third-quarter sales, to €3.24 billion, on 8% organic growth. Adjusted EBITDA rose 32% year over year, to €541 million, exceeding the consensus of €537 million, as provided by S&P Capital IQ. Profits were boosted by the company’s vitamin transformation program.