BASF Shares Dip as Impairments Drag Earnings Lower

BASF shares took a 3% hit today as impairments and restructuring costs weighed heavily on the company's earnings. The German chemical giant announced that it expects earnings before interest and taxes (EBIT) for 2024 to be 2 billion euros, falling short of the company-provided market consensus of 3.2 billion euros and the previous year's figure of 2.2 billion euros. The company attributed this shortfall to non-cash-effective impairments, notably on battery materials within the Surface Technologies segment, as well as restructuring costs across all segments.

BASF's net income is also expected to be affected by these charges, with the company unable to provide a specific figure for net income as the contributions from a significant non-integral at-equity participation have not yet been received. The company expects that the analyst consensus of 2.2 billion euros will not be achieved.

Despite the challenges, BASF expects free cash flow for the year to rise to 700 million euros, considerably ahead of the analyst consensus of 400 million. However, payments made for property, plant, and equipment and intangible assets rose considerably but were lower than expected.

BASF is making progress with its announced restructuring measures, which account for a significant portion of the special items. The company's cost savings program is on track to achieve €2.1 billion in annual savings by 2026, with €800 million already realized. However, the impairments and restructuring costs are expected to impact the company's long-term financial health, as they will reduce the company's earnings and potentially impact its ability to invest in future growth opportunities.



Analysts' opinions on BASF's shares remain mixed, with some maintaining a 'Buy' rating while others have a 'Neutral' or 'Sell' rating. The average target price for BASF shares is 53.16 euros, with a spread of +13.11% compared to the last close price of 47.00 euros.

Investors should closely monitor BASF's progress in implementing its strategic measures to mitigate the impact of impairments and restructuring costs. The company's ability to manage these challenges and maintain its core businesses will be crucial for its long-term success.