BASFY
🇩🇪 BASF, the world’s largest chemical company by revenue, has been impacted by high energy costs and a weak German industrial sector, but maintains a dominant position in specialized chemicals, plastics, agriculture, and industrial solutions.
📉 The company is undergoing a cost-cutting and restructuring program to adapt to lower demand and increased margin pressure, potentially improving its financial performance.
💰 A significant \$10 billion project in China is expected to increase free cash flow in the medium term, with the management projecting an accumulated free cash flow of \$12 billion between 2025 and 2028.
@bernardodegarcia:
“BASF is the great titan of the chemical industry in Germany, with roots dating back to 1865. However, its stock has fallen nearly 50% since 2017, mainly due to high energy costs and the weakness of the German industrial sector. Despite being a leading German multinational, in fact, the largest chemical company in the world in terms of revenue, it has been affected by the increase in gas prices and the recession in its domestic market, the eurozone in general, and partly by the lack of demand in other key markets. However, BASF maintains a dominant position in specialized chemicals, plastics, agriculture, fertilizers, and industrial solutions in general. Being a global leader in agriculture is important, as it offers herbicides, fungicides, and also significant chemical innovation for crops, an area with resilience, although with competition from other players like Bayer or Corteva. It has also recently initiated a cost-cutting and restructuring program to adapt to this new reality of lower demand and greater pressure on these margins. A highlight of its market is the completion of a 10 billion euro project in China, which is expected to increase its free cash flow in the medium term. The management indicates that in 2028 they could reach an EBITDA between 10 and 12 billion euros and an accumulated free cash flow of 12 billion between 2025 and 2028. This situation suggests that we are in a low cycle in its earnings and that if the European and global economy recovers, BASF could benefit greatly. The risks remain the volatility of energy costs, the industrial recession in Europe, and macro uncertainty.”
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