Why is BASF stock price dropping?

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Despite the corona pandemic, the chemical company BASF is sticking to its dividend for 2019. The distribution should remain unchanged at EUR 3.30 per share, the company announced on Wednesday in Ludwigshafen. That corresponds to a dividend of currently 6.6 percent. This means that BASF remains one of the best dividend payers in the DAX. The general meeting is to decide on June 18. In contrast, BASF withdrew its outlook for the current financial year.

So why is price going down?

The forecast sales and earnings development will not be achieved, it said. BASF previously expected revenues of EUR 60 billion to EUR 63 billion and adjusted earnings before interest and taxes (EBIT) of EUR 4.2 billion to EUR 4.8 billion.

“The first quarter of 2020 was not a normal quarter. The same will be true for the second quarter and likely for the entire year,” said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF SE

BASF expects to be significantly impacted by the economic consequences of the weak global demand and lost production in the second quarter of 2020, particularly as a result of the ongoing production interruptions in the automotive industry. The consequences of the corona virus pandemic are also affecting other customer industries, which is why the company expects a significant drop in sales in the second quarter of 2020. For the third and fourth quarters of 2020, BASF currently expects a slow recovery, but the development at the moment is extremely uncertain and cannot be planned.

In a first reaction, the BASF share slumped on Wednesday on the trading platform Tradegate by two percent. In the end, the BASF stock price went unchanged at the end of Xetra. On Thursday morning, after the announcement of the full figures for the first quarter of 2020, the share could increase slightly.

BASF Group sales in the first quarter of 2020 rose seven percent year-on-year to EUR 16.8 billion. The main reason for this was a four percent increase in volumes. Income from operations came to 1.6 billion Euros, six percent below the first quarter of 2019.