BASF says it is targeting a gain in operating profit before one-offs of 1%-10% in 2017 after a 6% decline last year, but investors had hoped for an increase in operating profit of at least 12%, sending shares lower on the DAX index and wiping out gains made over the last two weeks.
In today's earnings conference call, BASF CEO Kurt Bock said the company is in talks with Iran over a possible investment of its oil and gas division in the country but any decision is in limbo due to uncertainty over the status of economic sanctions.
Bock also said he saw no need for BASF to pursue any "transformational" takeover deals, even as peers Bayer and Monsanto as well as Dow and DuPont are merging.
Morgan Stanley (NYSE:MS) stands to collect $120M if Bayer (OTCPK:BAYRY) closes its $57B takeover deal for Monsanto (NYSE:MON), which would be the second-largest deal fee for a single bank on record.
The big payout is a bright spot in an otherwise down year for M&A activity, as global deal volume YTD currently stands at ~$2.6T, 24% lower than the same period in 2015.
The payments were disclosed in a MON proxy filing, which also showed the company held takeover talks with three other groups - identified byFinancial Times as BASF (OTCQX:BASFY), Koch Industries and China's Sinochem - before agreeing to the pending deal with Bayer.
BASF says the two Ludwigshafen steam crackers will gradually resume output over the next few days because alternative supply lines will circumvent the disaster area, and downstream sites dependent upon supply from the steam crackers also would resume operations.
BASF says 24 sites including the steam crackers currently are shut or working at reduced loads as a result of the accident, which was considered the worst in the German chemical industry in more than 20 years.
BASF says two steam crackers at the plant remain halted and another 20 facilities are either stopped or only partially working.
Analysts say some production units could be down for months as investigations by the company and government agencies take place, possibly tightening European ethylene markets in 2017, which could benefit Dow Chemical (NYSE:DOW) and LyondellBasell Industries (NYSE:LYB).
Baader Bank analyst Markus Mayer says the closing of the two steam crackers mostly will impact BASF's basic chemicals division, which makes up ~21% of sales and 30% of EBITDA; he analyst estimates that 6% of annual earnings could be directly impacted by the fire, with as much as 3% of EBITDA at risk because the shutdown may last more than a quarter.
BASF says there was an explosion and a fire broke during work on pipelines in the north harbor area of its Ludwigshafen site, which is the world's largest chemical complex, covering an area of 10 sq. km and employing 39K workers.
BASF also is investigating the cause of an explosion at its Lampertheim facility, which makes additives for plastics.
BASF (OTCQX:BASFY -0.5%) releases preliminary Q3 results that showed a decline in earnings and sales from a year earlier, due largely to its divestment of its gas trading activities, but ahead of analyst consensus estimates.
BASF says Q3 operating earnings before special items fell 5.4% Y/Y to €1.5B (~$1.7B) from €1.6B a year ago, as sales fell 19.6% Y/Y to €14B; the company did not provide a net profit figure, but will release full Q3 results on Oct. 27.
BASF also reiterates its full-year guidance, expecting sales to fall by 6% or more while operating profit excluding special items should come in as much as 10% below last year.
BASF (OTCQX:BASFY) and Bayer (OTCPK:BAYRY) cut the outlook for their agrochemicals businesses, which analysts say could add to the urgency for global consolidation that has swept the industry.
Both German companies reported Q2 earnings today that were hurt by lower demand for the herbicides and pesticides made by their crop sciences divisions, as a global slump in commodities prices hurts farmers’ incomes.
“The agriculture market has gotten more difficult and that can certainly be a trigger for market consolidation," says NordLB analyst Thorsten Strauss, adding that cheap financing conditions also play a role.
Bayer says full-year profit for its agrochemicals division likely will decline by a low-single-digit percentage, instead of rising as it had previously projected.
Monsanto’s (NYSE:MON) negotiating position in Bayer's takeover offer has not become stronger, according to Commerzbank's Daniel Wendorff, noting that Bayer can still argue that the weak market environment in crop science will persist.
Total's (TOT -2.5%) stake in German surface finishing and metal plating company Atotech is expected to receive bids of more than €3B ($3.3B) from chemicals firms Umicore (OTCPK:UMICF) and Sinochem by tomorrow's deadline, Reuters reports.
Arkema (OTC:ARKAF), a former TOT subsidiary, and BASF (OTCQX:BASFY) have looked at Atotech but are seen as unlikely partners, while P-E firms such as CVC, Cinven, BC Partners, Advent, Bain and Carlyle are expected to submit bids, according to the report.
Atotech, which generates ~$1B in annual sales, is TOT's sole remaining specialty chemicals unit after the sale of Bostik to Arkema in 2014.
Even though Bayer (OTCPK:BAYRY) has sweetened the pot in its attempt to win Monsanto (NYSE:MON), analysts suggest the company is likely to reject the roughly $65B offer and could pursue other transactions such as combining with BASF's (OTCQX:BASFY) agro-chemicals unit.
"I don't think they believe selling for $125 (per share) today is in the best interests of shareholders... and I do believe they are still considering being a consolidator and not a consolidee," said Chris Kapsch, analyst at BB&T Capital Markets.
Universal Display (OLED +1.9%) is higher after agreeing to acquire BASF's (OTCQX:BASFY +2.3%) organic light emitting diode intellectual property assets for ~€87M.
OLED says the assets include more than 500 issued and pending patents around the world, and are aimed at accelerating development of commercial blue phosphorescent emissive materials.
Needham reiterates a Buy rating and $69 price target on OLED, saying that combined with last week's acquisition of a contract research firm specializing in advanced materials development, the moves are a good use of cash that could erect additional barriers against competitors as OLED displays gain broader adoption.
Even as it reiterates a Hold rating, Gabelli notes that light blue and dark blue emitter materials are "the holy grail" of OLED emitter materials, and the company will continue to strive to be able to launch the first commercial light blue and dark blue emitter materials.