Chemicals stocks weighed on European markets today as German giant BASF warned on profits in the wake of the US-China trade war.
The company did worse than the already gloomy predictions from analysts, who had not bought its insistence in May that operating profit would grow. The firm had forecast growth at the lower end of its one to 10 per cent range.
It now expects operating profit to fall 30 per cent this year.
“Everybody expected a warning. But not to that extent … really disastrous numbers,” one trader told Reuters.
Shares in the firm took a 5.8 per cent hit, falling to €58.98.
The news set off the dominoes as shares fell in rivals including Lanxess, Wacker Chemie, Covestro and Evonik.
The firm blamed significantly weaker than expected industrial production, in particular a downturn in the automotive sector. Car production fell six per cent in the first half of 2019, it said.
Meanwhile the Chinese market, the world’s largest, saw a remarkable 13 per cent drop.
US President Donald Trump has threatened to slap a 25 per cent tariff on imported cars.
BASF was also hit by worries among North American farmers. Poor weather meant growers planted less than last year.
And while trade disputes with China dragged on, farmers were less worried about protecting their crops. Therefore they bought fewer pesticides from BASF, the firm said.
US-China relations are unlikely to rapidly easy during before the end of the year, BASF said.
Sales dropped four per cent in the second quarter to €15.2bn (€13.7bn). Operating profit before special items fell 47 per cent year-on-year.
Meanwhile operating profit for the second quarter is expected to be 71 per cent lower at €500,000.
The company will confirm its first-quarter results on 25 July. Its shares have fallen just under 40 per cent over the past 18 months.
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