LONDON: BASF SE led European chemical stocks lower as a slowdown in markets from cars to crops and the impact of the US-China trade war led the industry’s leader to issue a stark profit warning.
The world’s biggest chemical maker slashed its forecast for 2019, saying earnings before interest, taxes and special items could be 30% lower versus 2018 levels, “mainly due to the trade conflicts,” it said on Monday.
Shares of the Ludwigshafen, Germany-based maker of plastics, pesticides and lubricant additives dropped as much as 6.2%, the most in two months.
Rivals Lanxess AG and Covestro AG also declined.
Industry warnings about economic weakness have been piling up, including from German lubricant maker Fuchs Petrolub SE and US manufacturer H.B. Fuller Co, amid a deterioration in manufacturing.
The diminished outlook at BASF underscores the difficulties in the chemical sector as demand weakens. Chief executive officer Martin Brudermueller has sought to fortify the company by simplifying the structure, cutting costs and prioritising high-margin products.
“Whilst previous guidance looked a stretch, the size and longevity of the demand shock is far beyond our initial expectations,” said Thomas Wrigglesworth, an analyst at Citigroup.
“There is likely an element of ‘kitchen sinking.”’ — Bloomberg
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