Outlook

The global industrial economy continued to cool in the third quarter of 2019. The escalating trade conflict between the United States and China and the uncertainty surrounding Brexit exacerbated the existing economic downturn. This has particularly affected Europe’s export-oriented countries, as well as the United States. Industrial growth continued in China, albeit at a slower pace. Production in the global automotive industry again declined compared with the already low level at the end of the first half of the year. The price of oil decreased despite an intensification of the geopolitical conflicts in the Middle East. The U.S. dollar continued to appreciate against the euro.

Compared with the Half-Year Financial Report, we have therefore adjusted our assessment of the global economic environment in 2019 as follows (assumptions from the Half-Year Financial Report 2019 in parentheses):

• Growth in gross domestic product: 2.5% (2.5%)
• Growth in industrial production: 1.5% (1.5%)
• Growth in chemical production: 1.5% (1.5%)
• Average euro/dollar exchange rate of $1.15 per euro ($1.15 per euro)
• Average Brent blend oil price for the year of $65 per barrel ($70 per barrel)

Risks relating to market growth, margins and regulation/policy in the form of trade conflicts discussed in the BASF Report 2018 materialized and led to a decline in earnings in 2019. Additional uncertainty stems from a further intensification of the trade and geopolitical conflicts, with repercussions for the price of oil. For the remaining risk factors, the statements on opportunities and risks made in the BASF Report 2018 continue to apply overall. According to our assessment, there continue to be no individual risks that pose a threat to the continued existence of the BASF Group. The same applies to the sum of individual risks, even in the case of another global economic crisis.

As a consequence of the considerably weaker-than-expected business development in the second quarter of 2019 and the slowdown in global economic growth and industrial production, mainly due to the trade conflicts, on July 8, 2019, we adjusted the sales and earnings forecast¹ for the BASF Group made in the BASF Report 2018. We do not expect to see any recovery in global economic activity in the fourth quarter either. We are therefore maintaining the forecast presented in the Half-Year Financial Report 2019 for the 2019 fiscal year in comparison with the 2018 fiscal year:

• Slight decline in sales
• Considerable decline in EBIT before special items of up to 30%
• Considerable decline in return on capital employed (ROCE)