BASF signals COVID-19 economic recovery despite Nutrition & Care dip
29 Apr 2021 --- BASF’s Nutrition & Care segment has declined slightly, according to the company’s Q1 2021 results. However, the overall group saw 16 percent sales growth to hit €19.4 billion (US$23.5 billion). This was mainly due to higher prices and volume growth.
“For the Nutrition & Care segment, we expect slightly higher sales than in 2020. Higher volumes in both divisions will likely be partially offset by negative price and currency effects,” a BASF spokesperson tells NutritionInsight.
BASF’s planning assumes improved product availability, especially in the Nutrition & Health division. Therefore, it expects the segment’s income from operations (EBIT) before special items to be slightly above the previous year due to a higher contribution from the Nutrition & Health division, driven by volume growth.
Nutrition & Health sales were negatively impacted by slightly lower price levels overall.
Negative currency effects take a toll
Nutrition & Care, which accounted for 10 percent of BASF’s 2020 sales, saw a sales dip of 3 percent compared with Q1 2020.
The company says that this reflected negative currency effects, mainly relating to the US dollar. EBIT before special items decreased considerably compared with the prior-year quarter.
“It is also important to know that in the prior-year quarter we had a very strong business due to pre-buying as a result of COVID-19,” emphasizes the spokesperson.
“The decline in earnings impacted both divisions and primarily reflected lower margins as a result of lower sales. However, we were able to increase volumes by 3 percent, which could only partially offset the decline,” they continue.
Sales volumes were slightly above the prior-year quarter in both divisions. In the Care Chemicals division, higher volumes in the home care, industrial and institutional cleaning and industrial formulators business more than compensated for lower volumes in the other business areas.
The Nutrition & Health division recorded significantly higher volumes in the aroma ingredients and pharmaceutical businesses. This was partially offset by significantly lower sales volumes in the animal nutrition business.
Continued tailwinds
Despite a weakened performance in Nutrition & Health, BASF Group has carried over the tailwinds from the strong fourth quarter of 2020 into the first quarter of 2021, says Martin Brudermüller, chairman of the board of executive directors of BASF.
Compared with the same quarter of the prior year, EBIT before special items rose by 42 percent to €2.3 billion (US$2.8 billion). This was primarily attributable to considerably higher earnings contributions from the Materials and Chemicals segments.
The Surface Technologies segment also recorded considerable earnings growth thanks to the recovery in automotive production. All regions contributed to the considerable increase in the BASF Group’s earnings in the first quarter of 2021.
The economic situation is still “extremely fragile,” BASF emphasizes.
Signs of a strong recovery
BASF argues that economic indicators have risen over the past few months, signaling a stronger recovery in macroeconomic activity than it previously assumed.
However, the renewed rise in COVID-19 infection rates in many countries and ongoing restrictions on economic activity mean that the economic situation is still extremely fragile.
The company also acknowledges that disruptions to global supply chains could temporarily impact industry growth. Against this background, the assumptions presented in the BASF Report 2020 for growth in global gross domestic product and industrial and chemical production have been raised moderately.
Uncertainty continues
Nonetheless, the market environment continues to be dominated by a high level of uncertainty due to the coronavirus pandemic. Opportunities could arise from a faster vaccination rate and a more rapid recovery of the economy as a whole, as well as a continuation of the positive margin trend.
In its Q1 results, Kerry also flagged sectors like foodservice are gearing up to make a comeback as the tides begin to turn on the COVID-19 pandemic in many regions.
By Katherine Durrell
