Outlook 2019

We expect weaker global economic growth in 2019 compared with 2018. At 2.8%, global GDP growth will presumably be slower than in 2018 (+3.2%). Chemical production is expected to increase at a rate of 2.7%, on a level with the previous year (+2.7%). We anticipate an average oil price of $70 for a barrel of Brent blend crude and an exchange rate of $1.15 per euro. Despite the challenging environment characterized by a high level of uncertainty, we aim to grow profitably and slightly increase the BASF Group’s sales and income from operations (EBIT) before special items in 2019. The return on capital employed (ROCE) should slightly exceed the cost of capital percentage but decline slightly compared with 2018.

We expect growth in our customer industries to continue. For the automotive industry, we anticipate a slight recovery after lower production in the previous year. Our outlook assumes that the trade conflict between the United States and its trading partners will ease over the course of the year, and that Brexit will occur without wider economic repercussions.

Sales, earnings and ROCE forecast for the BASF Group1

  • Slight sales growth, mainly from higher sales volumes and portfolio effects
  • EBIT before special items slightly above prior-year level
  • ROCE slightly higher than cost of capital percentage

We have based the outlook on the segment structure as of January 1, 2019, and adjusted the segment data for 2018 accordingly. In addition to the new segment structure, the composition of a number of divisions has also changed.

For more information on the new segment structure, see:
The BASF Group
Note 4

Our forecast for 2019 takes into account the definitive agreement between BASF and LetterOne to merge their oil and gas businesses. Closing of the transaction is expected in the first half of 2019, subject to the required regulatory approvals. Until closing, the earnings of our oil and gas business will be presented as a separate item, income after taxes from discontinued operations, and will not be included in the sales or EBIT before special items of the BASF Group. After closing, the pro rata share of income after taxes of the joint venture, Wintershall DEA, will be reported as income from companies accounted for using the equity method in the BASF Group’s EBIT before special items, presented under Other.

This outlook also includes the acquisition of Solvay’s integrated polyamide business, which is expected in the second half of 2019. However, we currently do not expect this transaction to have any material effect on sales, EBIT before special items or ROCE at the level of the BASF Group in 2019.

We anticipate slightly higher sales for the BASF Group in 2019. The main contributing factors should be volumes growth and portfolio effects, especially from the acquisition of significant businesses from Bayer that was closed in August 2018. We expect considerable sales growth in the Agricultural Solutions and Nutrition & Care segments as well as in Other, and slightly higher sales in the Surface Technologies and Materials segments. Sales in the Chemicals segment are expected to be on a level with the previous year. Our planning for the Industrial Solutions segment assumes slightly lower sales due to the transfer of BASF’s paper and water chemicals business to the Solenis group as of January 31, 2019.

EBIT before special items will presumably be slightly above the 2018 level. This will largely reflect significantly higher contributions from the Agricultural Solutions, Industrial Solutions, Surface Technologies and Nutrition & Care segments. We are forecasting a slight improvement in earnings in the Chemicals segment. In the Materials segment, by contrast, we anticipate considerably lower EBIT before special items, driven by a decline in margins in the isocyanates business. We also expect the earnings generated by Other to be considerably below the prior-year figure. Positive measurement effects for our long-term incentive program arose in 2018, which we do not expect in 2019.

In 2019, we expect to achieve a ROCE slightly above the underlying cost of capital percentage of 10%. The average cost of capital basis will increase in 2019 due to the full-year inclusion of the assets acquired from Bayer in August 2018. As a result, we expect the BASF Group’s ROCE to decline slightly, i.e., at most one percentage point compared with the previous year. In 2018, ROCE amounted to 11.5% adjusted to the new segment structure. Compared with the previous year, we expect a considerable decline in ROCE in the Materials segment (2018: 26.1%) and a slight decrease in the Chemicals segment (2018: 17.7%). By contrast, we anticipate slight year-on-year increases in the Surface Technologies (2018: 4.6%), Nutrition & Care (2018: 11.8%) and Agricultural Solutions (2018: 5.1%) segments, and a considerable increase in the Industrial Solutions segment (2018: 8.7%).

The significant risks and opportunities that could affect our forecast are described in Opportunities and Risks. Achievement of our sales and earnings forecast largely depends on the accuracy of our macroeconomic assumptions for 2019.

1 For sales, “slight” represents a change of 1–5%, while “considerable” applies to changes of 6% and higher. “At prior-year level” indicates no change (+/–0%). For earnings, “slight” means a change of 1–10%, while “considerable” is used for changes of 11% and higher. “At prior-year level” indicates no change (+/–0%). At a cost of capital percentage of 10% for 2018 and 2019, we define a change in ROCE of 0.1 to 1.0 percentage points as “slight,” a change of more than 1.0 percentage points as “considerable” and no change (+/–0 percentage points) as “at prior-year level.”