BASF SE – We create chemistry

Brief summary for investors: BASF is a leading global chemical company with a diversified portfolio ranging from chemicals to materials to agricultural solutions. Current performance is driven by volatile demand in key segments and high energy costs.

Development The share price has shown a significant downward trend since its high in early 2021 (approximately €72), currently at around €45. This development correlates with the deterioration in profitability. After a strong 2021 (EPS: €1.50), BASF recorded losses and marginal profits in 2022 and 2023, respectively, driven by the energy crisis in Europe, rising raw material prices, and weakening demand. The latest quarterly figures continue to show volatility, with a significant decline in earnings in the most recent reporting quarter (Q2 2025: EPS €0.02 vs. Q1 2025: EPS €0.23).

Opportunities:

• Growth Segments: Strategic partnerships, e.g., in the area of battery materials with CATL, position BASF in the wake of electromobility and energy transition trends.
• Diversification: The broad portfolio across six segments offers relative resilience against economic fluctuations in individual industries.
• Cost Efficiency: Ongoing restructuring measures aim to structurally address high European energy costs.

Risks:

• Cyclical Dependence: Profitability is heavily dependent on industrial demand, which is currently weak, particularly in Europe.
• Energy Costs: High and volatile energy and raw material prices in Europe are putting a lasting strain on margins.
• Geopolitical uncertainty: Trade conflicts and supply chain risks pose a permanent challenge.
• Debt: A debt-to-equity ratio of ~1.3 limits financial flexibility during a period of earnings weakness.

Additional notes: Operating cash generation remains intact, with solid free cash flow of €2.6 billion in the last quarter, underscoring financial stability despite low profits.

Conclusion: BASF faces significant cyclical and structural challenges, reflected in its weak share price performance in recent years. Short-term earnings remain under pressure. The long-term investment thesis depends on the successful implementation of its strategy to decouple itself from high European costs and benefit from growth drivers outside the traditional chemicals business. The current valuation point could represent an entry opportunity for long-term investors, but requires patience.

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