Basf ETR: BAS reported higher third-quarter earnings and raised the lower end of its 2026 EBITDA before special items outlook, citing improved pricing, volume growth across its core businesses and lower fixed costs. The company also said it is continuing to reduce debt, execute share buybacks and evaluate a potential combination with Evonik, while emphasizing that any transaction would need to be value-accretive.
“BASF delivered another strong quarter, with considerable growth in EBITDA before special items, driven by all core businesses,” Chairman of the Board of Executive Directors Markus Kamieth said during the company’s third-quarter press conference.
Third-Quarter Earnings Rise on Prices, Volumes and Cost Actions
EBITDA before special items increased 15% year over year to €1.6 billion in the third quarter. Kamieth said the improvement in the core businesses was driven by higher specific margins, solid volume growth and lower cash fixed costs.
The company said prices rose across all four core segments during the quarter. BASF had begun raising prices, particularly in upstream operations, after an escalation of the Middle East conflict in the second quarter. The momentum continued into the third quarter, with price increases also extending to downstream businesses.
BASF said it recorded volume growth in all core segments during the first nine months of 2026, supported by the ramp-up of its Zhanjiang Verbund site in China, its integrated production network and its local-for-local strategy. Chemicals and Nutrition & Care delivered the strongest volume contributions in the third quarter.
Regionally, the company reported considerable volume growth in China, along with higher prices in upstream businesses. Asia-Pacific excluding China also posted strong volume growth and substantial price increases. European sales increased considerably on higher prices, while volumes were broadly stable. In North America, BASF reported strong price gains and solid volume growth, led by Chemicals and Nutrition & Care.
Not every segment improved. EBITDA before special items in Surface Technologies fell considerably from the prior-year period, largely because the prior-year quarter included a positive one-off effect from government grants at Metivo, the business formerly called ECMS. Agricultural Solutions also reported lower earnings.
Agricultural Solutions Faces South American Pressure
Agricultural Solutions sales fell almost 20% to €1.4 billion in the third quarter, a seasonally weaker period for the business. BASF attributed the decline primarily to substantially lower volumes in South America, where it said market conditions remain challenging.
The company also said some South American sales had been brought forward into the second quarter ahead of an ERP software migration on July 1. The rollout has now been completed. Pricing in the region was affected by high competition, while lower fixed costs partly mitigated the earnings decline.
Chief Financial Officer Dirk Elvermann said unfavorable weather conditions, pressure on farmers’ incomes and a weaker market across the industry weighed on crop protection and seed sales in South America. BASF expects the seasonally stronger fourth quarter to improve from the third quarter and said it is confident it can repeat its fourth-quarter performance from the previous year.
Cash Flow, Debt Reduction and Shareholder Returns
For the first nine months of 2026, BASF reported EBITDA before special items of €6.4 billion, up more than €900 million from the prior-year period. Materials and Industrial Solutions made the largest contributions to the increase. Group cash fixed costs declined about 3% to €11.8 billion as restructuring efforts continued.
Net income reached €5.2 billion, including a €3.5 billion after-tax disposal gain from the coatings transaction with Carlyle. Free cash flow was negative €1 billion, compared with negative €870 million in the prior-year period.
Cash flow from operating activities declined to €823 million, mainly reflecting a €1.5 billion increase in net working-capital requirements. Higher sales increased receivables, while higher raw-material prices raised the capital tied up in inventories. Operating cash flow was also burdened by about €570 million in spending on transformation activities, including restructuring and new ERP systems.
Capital expenditures and payments for intangible assets fell about €980 million to €1.9 billion in the first nine months. BASF now expects full-year spending on property, plant, equipment and intangible assets to be clearly below €3 billion, compared with its February forecast of €3.4 billion.
The company said net debt was 20% lower than at the end of September 2025 and is expected to reach about €15 billion by the end of 2026. BASF used a significant share of portfolio proceeds to repay or redeem debt. Fitch recently reaffirmed its single-A credit rating with a stable outlook.
BASF bought back approximately €1.9 billion of shares between November 2025 and Oct. 23, 2026, as part of a program of at least €4 billion announced in September 2024. The company reiterated its commitment to at least €12 billion in shareholder distributions from 2025 through 2028, including about €8 billion in dividends and about €4 billion in share buybacks.
Outlook Raised; Evonik Talks Remain Confidential
BASF narrowed and raised its 2026 EBITDA before special items forecast to a range of €7.4 billion to €7.8 billion. It maintained its full-year free cash flow forecast of €1.5 billion to €2.3 billion, citing geopolitical and global economic uncertainty, particularly around oil and gas prices.
Kamieth said a potential combination with Evonik could be strategically and financially compelling because the companies’ portfolios and capabilities are complementary. However, he stressed that an acquisition is “a could do, not a must do,” and said BASF would not overpay or pursue a deal that is not value-accretive for shareholders.
The company declined to discuss the status of contacts, negotiations or possible transaction structures with Evonik. Kamieth said that a transaction of that scale would require regulatory approvals and would not be expected to close before 2028 if it proceeded.
Separately, BASF said it has reduced its workforce by about 8,600 positions since January 2024, excluding divestiture-related reductions and hiring tied to the Zhanjiang joint venture. About two-thirds of those reductions occurred in Europe. The company expects restructuring and position reductions to continue under its CoreShift program through 2028 and 2029 as it targets a 20% reduction in net cash fixed costs in its core businesses.
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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