Basf Q1 Earnings Call Highlights

Key Points

• BASF reported Q1 EBITDA before special items of EUR 2.4 billion (down from EUR 2.5 billion) and slightly lower sales due to currency headwinds and price declines, while delivering solid volume growth across most segments—notably Petrochemicals, Monomers and Nutrition & Health.
• The March Middle East conflict and Strait of Hormuz disruption put global supply chains under severe stress; BASF activated a cross-divisional crisis team, says sales to the region are less than 1% of group sales and currently sees no significant supply risk through end-Q2 thanks to local-for-local Verbund sites and trading flexibility.
• On capital allocation management expects about EUR 5.8 billion pre-tax from the planned coatings sale, is continuing buybacks and a proposed dividend of EUR 2.25/share, and maintained full-year guidance of EUR 6.2–7.0 billion EBITDA before special items and EUR 1.5–2.3 billion free cash flow.

Basf ETR: BAS reported first-quarter 2026 results marked by “two phases,” with moderate growth in the first two months driven by China and a sharp shift in market conditions in March following the conflict in the Middle East and the closure of the Strait of Hormuz to seaborne transport of oil, gas, and chemicals.

CFO Dirk Elvermann said BASF delivered “resilience” in a demanding environment, posting EBITDA before special items of EUR 2.4 billion, down from EUR 2.5 billion a year earlier. Sales declined slightly, which Elvermann attributed to strong currency headwinds and lower prices, even as the company achieved “solid volume growth.”

Volume growth offsets pricing and currency pressure

Elvermann said BASF grew volumes in all segments except Surface Technologies, where volumes declined slightly. He highlighted the most pronounced volume gains in Petrochemicals, Monomers, and Nutrition & Health, with several operational drivers:

• Petrochemicals: Strong volume growth supported by the “successful and on-time startup” of BASF’s new Verbund site in South China and “already high utilization rates.”
• Monomers: Significant volume increases “especially for isocyanates and ammonia.”
• Nutrition & Health: Considerable volume growth following the restart of vitamin production in Ludwigshafen last summer.

Prices declined “particularly in the core businesses,” which management linked to ongoing competitive pressure and lower average raw material prices earlier in the quarter. Surface Technologies was an exception on pricing, with “significant price increases” driven mainly by higher precious metal prices. Agricultural Solutions pricing was described as “almost stable.”

Currency effects weighed on sales across all divisions, primarily due to the depreciation of the U.S. dollar and the Chinese renminbi versus the prior-year quarter. Elvermann said that excluding currency headwinds of more than EUR 100 million, EBITDA before special items “would have reached the level of the prior year quarter.”

Middle East disruption: crisis response and supply chain positioning

Management spent significant time addressing the implications of the Middle East conflict and the Strait of Hormuz blockade, emphasizing that customer sales into the Middle East are small. Elvermann noted that BASF’s sales to customers in the region accounted for “less than 1%” of group sales in both 2025 and the first quarter of 2026.

Even so, he said global supply chains are “under severe stress,” and feedstock availability is a challenge for the industry. BASF activated a cross-divisional crisis response team and, for the coming weeks, does not see “significant supply risk” for its production.

In response to questions from Goldman Sachs, Elvermann said BASF’s current supply-risk confidence covers “the time horizon until end of Q2,” based on rolling physical and pricing risk analysis. He added that most force majeure declarations are currently “coming from Asia,” not Europe.

Elvermann also outlined structural advantages he said help BASF remain resilient, including its “local-for-local production approach,” integrated Verbund sites, flex-feed steam crackers in Antwerp, Zhanjiang, and Port Arthur, and a dedicated trading business for key feedstocks. He said the trading arm, BASF Intertrade, typically handles volumes “significantly larger” than BASF’s own needs, offering flexibility to redirect material to captive use during supply disruptions.

Segment earnings: gains in Surface Technologies, pressure in Chemicals

Elvermann attributed the year-over-year EBITDA before special items decline to offsetting segment movements. “Considerable earnings growth” in Surface Technologies and slight growth in Materials were outweighed by weaker Chemicals, Agricultural Solutions, Nutrition & Care, and “other,” while Industrial Solutions was stable.

Surface Technologies’ improvement was driven mainly by Environmental Catalyst and Metal Solutions (ECMS). Elvermann said results benefited from higher precious metal trading contributions, along with lower fixed costs due to “one-off payments” tied to the resolution of a litigation matter.

In Materials, earnings rose slightly due to Monomers, helped by lower fixed costs and higher contribution margins.

By contrast, Chemicals declined “considerably,” reflecting lower contribution margins due to global overcapacities, higher turnaround intensity (including Port Arthur), and higher fixed costs from ramping the new South China Verbund site. Elvermann noted, however, that the Zhanjiang site delivered a positive EBITDA before special items in March. He cautioned later on the call that BASF still maintains a “more cautious forecast” for Zhanjiang and would not assume continuous positivity for the rest of the year.

Nutrition & Care was weaker mainly due to price-related margin declines in Care Chemicals, while Nutrition & Health improved “substantially” on higher volumes and reduced fixed costs. Agricultural Solutions earnings decreased slightly, largely due to currency effects, although management said slight volume growth in all regions supported performance.

Cash flow, balance sheet, and cost savings progress

President of Corporate Finance Christian Jützi reported EBIT of EUR 1.3 billion, with special charges in EBIT of around EUR 170 million (down from about EUR 430 million a year earlier), largely related to restructuring measures. Net income improved by EUR 119 million to EUR 927 million.

Free cash flow improved by EUR 423 million to minus EUR 1.4 billion, with Jützi emphasizing that negative first-quarter free cash flow is typical due to the seasonal nature of Agricultural Solutions. Operating cash flow benefited from dividends received from Wintershall Dea, paid after reimbursement under federal investment guarantees.

Cash fixed costs declined by around 5% to EUR 3.9 billion, attributed to restructuring and positive currency effects. On the balance sheet, Jützi said the equity ratio remained “solid” at 43.4% despite the share buyback program, and net debt was unchanged versus the end of March 2025, rising sequentially due to seasonal working capital effects.

Management reiterated confidence in achieving targeted annual cost savings of around EUR 2.3 billion by year-end, with an annual run rate of EUR 1.9 billion achieved by the end of March. One-time costs are expected to total around EUR 1.9 billion, with EUR 1.6 billion incurred by the end of the first quarter.

Capital allocation: coatings proceeds, buybacks, and maintained guidance

Elvermann reiterated BASF’s capital allocation priorities and said the company expects to close the coatings transaction with Carlyle in the second quarter, subject to customary regulatory approvals, receiving pre-tax cash proceeds of around EUR 5.8 billion. Taxes are assumed to be in the “mid triple-digit million euro range.” Asked about P&L and dividends from the retained stake, Elvermann said he would not expect dividends “in the short term” from the joint venture, describing the financial effect as retained earnings and the closing cash inflow.

BASF also continues monetization of oil and gas assets. Elvermann said first-quarter proceeds from selling a portion of Harbour Energy shares were about EUR 300 million, and BASF’s remaining stake stands at around 30% of shares outstanding. He reiterated BASF considers the holding a financial investment and plans to exit “over time.” The company also received Wintershall Dea dividends of almost EUR 800 million tied to settled insurance claims under federal investment guarantees.

On shareholder returns, BASF reiterated plans for a dividend of EUR 2.25 per share (subject to shareholder meeting approval) payable May 6. The share buyback program launched in November 2025—up to EUR 1.5 billion—is scheduled to conclude by end of June; BASF has repurchased about EUR 880 million (around 2.2% of shares). Elvermann said BASF has EUR 2.5 billion remaining under the broader plan through 2028 and has not yet decided whether to start another tranche immediately after June.

Despite uncertainty, BASF maintained its full-year 2026 guidance, including EBITDA before special items of EUR 6.2 billion to EUR 7.0 billion and free cash flow of EUR 1.5 billion to EUR 2.3 billion. Elvermann told analysts the company is “optimistic for the second quarter,” citing pricing power expected to flow through as contract resets allow, while noting that the second half of the year remains hard to assess given uncertainty around the duration of the Middle East crisis and potential demand shifts.

About Basf ETR: BAS

BASF SE operates as a chemical company worldwide. It operates through six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care, and Agricultural Solutions. The Chemicals segment provides petrochemicals and intermediates. The Materials segment offers advanced materials and their precursors for applications and systems comprising isocyanates, polyamides, and inorganic basic products, as well as specialties for plastics and plastics processing industries. The Industrial Solutions segment develops and markets ingredients and additives for industrial applications, such as polymer dispersions, resins, additives, electronic materials, and antioxidants for automotive, plastics, paints and coatings, electronics, and energy and resource industries.

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