Despite a poor start to the year, basf is optimistic about 2019

- Mar 25, 2019-

Basf is confident global economic headwinds will ease in the second half of the year despite a weak start to the year, its chief executive said on Monday.

Martin Brudermuller said basf expects sales in 2019 to be "" slightly higher" "than in 2018, largely due to higher volumes and portfolio effects.

Earnings before interest and tax (EBIT) will also be slightly higher than in 2018.

Despite a fall in earnings across sectors in the fourth quarter of 2018, Brudermuller said basf was "addressing these challenges" with a cost-saving plan that would have a positive impact on earnings of 500 million euros in 2019.

Logistical problems related to low water levels in the Rhine resulted in a loss of 250 million euros in 2018, of which 200 million euros occurred in the fourth quarter.

In addition, with the acquisition of bayer's seed assets of 5.9 billion euros in August 2018, Brudermuller said that since the peak season for seeds usually comes in the first half of this year, the company is "" only making a negative contribution to costs" "rather than making a profit.

"Our view is that the trade conflict between China and the United States will ease...

A trade war between the us and China is paralysing everything else, and the two superpowers think the same of themselves...

"" [we also assume] there will be no broader economic impact from brexit.

"" [despite these] high levels of uncertainty, our goal is to improve profitability and increase sales slightly, and we want to increase ebit [before interest and tax] slightly." "

The chief executive said the company would proceed with the divestiture of its construction chemicals business as part of basf's restructuring - although he said he could not name any potential bidders because the company was analysing several offers as well as its paper chemicals and pigments.

"The pigment business is no longer driven by innovation," says Brudermuller.

"This business has nothing to do with the Verbund[the way basf manages its chemical park], which is why we have decided that we have to find a better owner to take this business into the future."

China's economy slows

Slower GDP growth in China in 2018 - accounting for half of basf's sales in the asia-pacific region and nearly 14 billion euros in 2019 - should not lead to a misunderstanding of these figures, Brudermuller said, adding that China is still growing at more than 6 percent.

In addition, he said, the Chinese government stands ready to take action and support the economy during difficult economic times, and this factor of long-term stable growth will remain strong.

"I've lived in China for 10 years, and this is not * times of slower growth.

But the Chinese government has done an excellent job of guiding and promoting long-term growth.

GDP is going to slow compared to last year, but from the absolute Numbers, we shouldn't worry about a year or two of slowdown, "said Brudermuller.

"We are very optimistic about the long-term development of Chinese industry."

The company announced plans in 2018 to build a 10 billion euro integrated production base in guangdong province.

The Rhine problem

Basf's * chief executive recognised that in the past the company had had to deal with low water levels in the Rhine "occasionally".

The Rhine is home to basf's headquarters, the port of Ludwig, and is highly dependent on barge traffic.

From the summer of 2018 to December, water levels on key chemical transport routes were too low due to a prolonged and severe drought, putting pressure on logistics as basf was unable to receive all the necessary raw materials through barges.

"[the occasional situation] has never been as bad and prolonged as 2018.

Is this true of all summers?

I don't think so, but we could have more summers like this, which could be linked to climate change, "Brudermuller said.

"That's why we have to be prepared for this: to strengthen the facility to ensure our own interests."

Among other measures, Brudermuller said the company was increasing investment in cooling water facilities, which come from the Rhine but become unusable when temperatures get too high.

He also mentioned an idea the company had already announced in 2018 -- to explore the possibility of using barges that could sail at extremely low levels with transportation companies, although he would not give further details.

Court action over the 2016 crash

In 2106, basf suffered a serious accident. A fire and explosion in ludwigshafen killed five people and injured several others.

For more than two years, the court proceedings have only just begun.

"It's very important that we have these court proceedings and we can't comment.

But it is good that it has been dealt with and will be over.

We will never forget it, it will be part of our history, "" he said.

"But we need to understand what's going on and that's important for us.

We have changed some measures and tightened some security measures.