With the release in hand, it became even clearer that the typical stops and starts had paused. In our long career, we have never seen such quarterly volume and price growth, whereas the drop was not that clear in Q2 20. In other words, BASF took full advantage. Despite the lifted guidance, a crucial question will be how long this period of satiation might last? Currently, it looks for a while. The spread of the Delta variant might stand against it.
Companies: BASF SE
BASF beat our as well as street expectations by +11% at the top line, but less at the profitability level (EBIT: +3%).
The recovery story continued with an extra push from China. Here to the effects from extreme weather events and other unpleasant ones (the pandemic) limited availability as exchanges between regions remained somewhat constrained. BASF’s pricing power could be seen in the rise of the profitability lines of the divisions in the early steps of the value chain.
BASF’s FY were finally stronger at the profitability level than expected by us after the release of some preliminary figures at the end of January. Despite more details, the stronger net working capital outflow seems to foil management’s quite cautious FY guidance. The start into the year might have not been a perfect one due to the weather conditions in some regions (e.g. US).
Santa Claus seems to be dressed in BASF’s colours and bringing strong end-of-year ‘presents’. The earlier steps of the chemicals’ value chain came in above consensus expectations in Q4. This end-year push lifted profitability above the previous quarter’s level, which brought FY EBIT before one-offs closer to FY 2019’s, but above our own guidance.
The reported preliminary figures were above our more cautious expectations and above consensus.
BASF’s official wording for the justification of the impairments taken in Q3 is that they expect continued oversupply of basic chemicals and weaker demand from certain end-customer industries. We find the idea of preparing the company for a BASF 2.0 quite compelling. Nevertheless, Martin Brudermueller still has a long way to go as impairments could be only be a signal. The management could see the pandemic as an opportunity for a fundamental shift.
Unlike Bayer, BASF’s agro-related impairment was not triggered by a write-down on the purchase price, only on the adoption of the production network. We believe the individual share for Surface Technologies, due to former Chemetall, and Chemicals as well Materials (no split provided) will be higher. We take the impairment as a kind of tidying up as the company ‘sells’ as a consequence of the pandemic’s weaker expectation in automotive and aerospace.
One can look at BASF’s figures and see what is going on in the (large volumes) chemicals industry. The drivers at the group level guide to lower volumes, but prices seem to be stable. Looking into divisional performances, the picture becomes less clear as the drivers of early steps (volumes: up; prices: down) of the value chain look different to those of later ones (volumes: down; prices: doing OK). There were no material changes to the preliminary figures.
BASF’s preliminary Q2 figures were characterised by a slightly better than expected operating and earnings performance before one-offs, but were hit by the negative effect from the impairment in the oil & gas business. The latter submerged the preliminary profitability figures to below our expectations. Consensus was also not meet on net earnings.
It looks to us as if BASF plans to change its business model as the company has financed, or plans to do so, some of its stakeholders: shareholders, customers and clients. NWC outflows significantly went up and the plans to cash out ~€3bn as a dividend remain in place. Against the background of the still spreading COVID-19 pandemic and the realistic cancellation of FY 2020 guidance, management’s decisions are puzzling to us.
The Q1 figures were better than expected, beating our expectations an
BASF’s reported figures showed the expected pattern, despite having beaten our quite cautious estimates, whereas consensus was broadly met. However, management manoeuvred the company through a difficult year quite well and was able to deliver its announced portfolio targets. But BASF sees future challenges ahead. Against the backdrop of the looming virus pandemic, management gave quite a cautious guidance but assuming no global spread of Coronavirus. Furthermore, it plans to be more aggressive i
German chancellor, Dr Merkel, had invited all relevant ‘players’, which are directly and indirectly involved in this complex situation. Germany is valued as an ‘honest intermediary’ in this currently-failed country. But Germany has some interest in solving this issue, which are not related to the official ones (e.g. migration to Europe): business.
Having food and feed broadly in common, Agricultural Solutions and Nutrition & Care gave BASF’s Q3 figures a nice push above our expectations and consensus, clearly supported by Surface Technologies. Interestingly, the strong volume decline in the early steps was fully compensated by the higher demand in the later steps – for the first time!
This could have been the first finding after BASF’s recent Investors Day sharing light on the company’s mid- to long-term ambitions of Agricultural Solutions. The latter has been earmarked for above-market growth and higher profitability, helped by innovative products.
Having attended the Investors Day, we obtained some valuable insights and a better understanding of where the momentum is expected to come from: new products and the digital agro platform.
BASF sells the pigments business to DIC for a 1.15x sales multiple, which we see at the lower end of its valuation range.
BASF’s Q2 reporting, or better H2(?), provided further details after the release of the preliminary figures earlier this month, whereas the presentation was not as straightforward as previous ones. We appreciate the greater details (e.g. relevant triggers for the development). All in all, management confirmed our view.
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The forthcoming UN Climate Change Conference (known as COP26) should result in an acceleration of governments’ actions to reduce CO2 emissions. This will result in an acceleration of customer end-user adoption rates which would be positive for AFC Energy which is developing zero-emission solutions for the EV-charging, construction, data centre and marine markets.
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Longspur Research and Radnor Capital Partners have launched the Active Net Zero Clean Energy Index to allow investors to measure the performance of companies actively enabling climate solutions.The key emphasis is on the word “active”. This pan-European index eliminates greenwashing by penalising fossil fuel activities and focuses on actual achievement and positive contribution, rather than promises for the future. Our proprietary selection methodology is systematic, rules based and quantifiable
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We see the UK Government’s Net Zero Strategy as being overall helpful but not especially definitive. Amongst our coverage group, Drax Group (DRX LN) and Velocys (VLS LN) benefit from the Humberside CCS cluster prioritisation and Velocys from SAF support. The amount of renewables is likely to boost the need for flexibility solutions where Drax, Gore Street (GSF LN) and SIMEC Atlantis (SAE LN) can benefit. Hydrogen companies ITM (ITM LN) and Powerhouse Energy (PHE LN) are likely to find support. T
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Brent crude topped $85 a barrel in London for the first time since 2018, the latest milestone in a global energy crisis that has seen prices soar.
West Texas Intermediate for November settlement rose 97 cents to settle at $82.28 a barrel in New York.
Brent for December delivery added 86 cents to settle at $84.86 a barrel.
The global benchmark rose above the key level in intraday trading but did not settle above it on Friday. US crude futures posted an eighth straight weekly
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ITM yesterday announced a capital raise of £250m to expand its capacities significantly. This comes sooner than we expected and seems like an opportunistic move to capture the market. The company will use the proceeds to expand its capacities to 2.5GW from 1GW by 2023 and to 5GW by 2024. The remainder of the proceeds will be used to reduce H2 production costs and to build an unparalleled support service. Overall, we are positively surprised.
Companies: ITM Power PLC
The group continues to experience strong underlying market conditions, with some supply chain shortages and transport constraints causing price rises. These issues are not expected to improve in the short term, but the group is confident of progress and results are anticipated to be in line with expectations. No change to forecasts. We retain our price target of 315p, which still offers good upside despite the strong outperformance by the shares over the year. The shares remain attractive on a s
Companies: Alumasc Group plc
Tungsten West (TUN.L) has joined AIM. Tungsten West is the 100% owner and operator of the historical Hemerdon tungsten and tin mine located near Plymouth in southern Devon. Hemerdon represents the world's third largest tungsten mineral resource, with a JORC (2012) compliant Mineral Resource Estimate of approximately 325Mt at 0.12 WO3. Capital raised on Admission: £39m. Anticipated Mkt Cap: £106.2m.
Future Metals NL (ASX:FME, FME.L) (formerly named Red Emperor Resources NL) had joined AIM
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Arrow Exploration Corp. (AIM: AXL ; TSXV: AXL) , the oil and gas exploration and production company, has conditionally raised approximately £8.8m and is due to complete its dual listing on AIM on 25 Oct. Market cap c£13.1m.
Devolver Digital to join AIM, an award-winning digital video games publisher and developer in the indie games space. Recently awarded indie 'Publisher of the Year 2021' by GamesIndustry.biz.
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Light Science Tech Holdings (LST.L), the controlled environment agriculture technology and contract electronics manufacturing Group has joined AIM. Raising £5.2m. Market Capitalisation approximately £17.4m.
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Gymshark has started to put together plans for a stock market listing according to City A.M. The company hit a £1bn valuation just over a year ago and boasts customers in more than 130 countries. Gymshark was founded by teen
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SIMEC Atlantis Energy have raised £2.6m at a share price of 2.5p in a fresh equity raise, representing 16% of the enlarged share capital.
Companies: SIMEC Atlantis Energy Ltd.
eEnergy’s FY’21 results confirm a transformational year. Organic revenue growth was 75% and four acquisitions have now been secured, including last month’s UtilityTeam deal. There are no surprises in the numbers and the outlook statement reiterates current year expectations. Energy market volatility increases the imperative for businesses to reduce consumption, eliminate waste and tighten risk management. This should present opportunities for eEnergy as it helps its clients navigate market uncer
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*A corporate client of Hybridan LLP
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Conduity Capital has left AIM.
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Softline the global solutions and services provider in digital transformation and cybersecurity, with its headquarters in London, is considering proceeding with a potential initial public offering of global depositary receipts representing its ordinary shares. The Company is considering applying for admission of the GDRs to the standard listing segm
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