FRANKFURT (Reuters) - BASF (BASFn.DE) shares fell almost 7% early on Tuesday after an overnight profit warning in which the German chemicals giant citing trade friction forecast a 30% fall in adjusted annual operating profit instead of a rise.
The U-turn triggered ratings downgrades from Citibank, JP Morgan, HSBC, Deutsche Bank and Jefferies and knocked shares in peers such as Covestro (1COV.DE), Evonik (EVKn.DE), Lanxess (LXSG.DE) and Wacker Chemie (WCHG.DE).
“Profits have collapsed, and it’s not even a recession; the second profit warning in seven months raises questions around credibility,” HSBC analyst Sriharsha Pappu said in a note, adding BASF’s outlook had been “aspirational”.
HSBC cut its rating on BASF to “Hold” from “Buy” and its target price to 61 from 75 euros.
Chief Executive Martin Brudermueller at the company’s AGM in May had insisted the company could achieve full-year operating profit growth at the lower end of a 1-10% range, even as analysts and journalists questioned the positive outlook.
“Brudermueller allowed himself to be swayed by the positive sentiment at the beginning of the year,” said Arne Rautenberg, a fund manager at Union Investment. “It won’t be the last big German company forced to revise its assumptions downward.”
BASF, which makes petrochemicals, coatings, automotive catalytic converters and foams, had assumed car sales would grow, even after 11 consecutive months of sales declines in China, the world’s largest car market.
On Monday BASF changed its tune and said the U.S.-China trade friction had dimmed the outlook: “The G20 summit at the end of June has shown that a rapid détente is not to be expected in the second half of 2019.”
It warned that revenue for 2019 was likely to fall rather than rise as it had earlier forecast. Rival Lanxess announced it would stick to its full-year outlook.
JP Morgan downgraded BASF to “neutral” from “overweight” in response. It said the magnitude of BASF’s profit warnings within three months showed its extensive portfolio offered no obvious benefit.
Analysts at Evercore ISI said BASF’s losses could prove worse than forecast, citing weakness in China where the company sees its first-half output falling 13%.
That could dip to “to something closer to mid-to-high teens,” Evercore ISI analysts said.
BASF is due to present detailed earnings for the second half of the year on July 25.
Its shares were down 4.8% at 1216 GMT at 59.61 euros. The stock is down almost 40% over the last 18 months.
German chemicals industry association VCI last week warned of falling revenue on slower economic growth, weakening industrial activity and uncertainty caused by global trade conflicts.
Reporting by Patricia Weiss, Tassilo Hummel, Vera Eckert and Hakan Ersen; editing by Edward Taylor and Jason Neely