Basf (ETR:BAS) reported a sharp increase in second-quarter earnings before special items, citing higher prices, volume growth and lower fixed costs, while raising its full-year EBITDA forecast.
Chairman of the Board of Executive Directors Markus Kamieth said EBITDA before special items rose 54% in the second quarter to €2.4 billion, with earnings improving in nearly all segments except Surface Technologies. He said the company benefited from stronger contribution margins, lower cash fixed costs and higher plant utilization, including at its new Verbund site in Zhanjiang, China.
Core businesses lead earnings growth
Kamieth said Materials, Chemicals and Industrial Solutions were the largest contributors to the year-over-year earnings increase. In Materials, higher contribution margins and lower fixed costs supported EBITDA growth, particularly in polyurethane and ammonia value chains. Chemicals benefited mainly from improved margins in petrochemicals, although scheduled maintenance at Ludwigshafen and a steam-cracker turnaround in Port Arthur, Texas, constrained earnings.
Industrial Solutions also recorded a significant improvement, driven by lower fixed costs in Performance Chemicals and higher margins in Dispersions and Resins. Nutrition & Care delivered a modest earnings increase, helped by lower fixed costs in Care Chemicals.
Surface Technologies was the exception. EBITDA before special items declined considerably, primarily due to lower earnings in precious-metal services within the ECMS division and the expiration of subsidies in Battery Materials, which increased fixed costs. Higher earnings in emissions catalysts partly offset those declines.
The company said price increases accelerated following the escalation of the Middle East conflict and the blockade of the Strait of Hormuz. BASF said it was able to maintain supply through local-for-local production, flexible-feed steam crackers and trading operations that sourced key feedstocks.
Volumes increased across most regions during the first half, with particularly strong growth in Greater China following the Zhanjiang site ramp-up. In North America, volumes fell slightly because of the planned Port Arthur turnaround, while prices increased considerably.
Agricultural Solutions prepares for IPO readiness
BASF said Agricultural Solutions remained on track to achieve IPO readiness by mid-2027. The standalone business posted volume growth in every region during the first half, particularly in fungicides, herbicides and seed treatment.
Sales declined slightly because of currency effects and somewhat lower prices, but second-quarter earnings growth enabled EBITDA before special items to nearly match the strong first-half 2025 result. Its EBITDA margin before special items was 29%, close to the prior-year level.
Kamieth said BASF continues to target growth in China but does not expect to undertake another investment on the scale of the Zhanjiang Verbund site in the next several years. He said many of Zhanjiang’s core petrochemical product lines were operating near or above 90% utilization, while some downstream assets were still progressing through customer qualification processes.
Restructuring, cost reductions and portfolio actions
BASF said it had reduced its global workforce by 7,000 positions between January 2024 and the end of June 2026, excluding workforce changes from divestitures and the buildup at Zhanjiang. About two-thirds of those reductions occurred in Germany, according to Kamieth.
At BASF SE in Ludwigshafen, full-time-equivalent employment fell below 30,000 in May for the first time since 1954. Kamieth said the site’s profitability had improved but was not yet sufficient, and BASF would continue adjusting its asset portfolio. The share of highly competitive production units at Ludwigshafen has increased to 88% from 78% since 2024, the company said.
The company expects annual cost savings of about €2.3 billion by the end of 2026. Measures implemented by the end of June represented annual savings of €2 billion, while total one-time costs are still expected to reach at least €1.9 billion by year-end.
BASF also said its CoreShift program is intended to reduce net cash fixed costs in its core businesses by as much as 20% by 2029 compared with 2024. The company reported a 4% reduction in the first half of 2026, adjusted for currency, portfolio and one-time effects.
- BASF completed the sale of its coatings activities to Carlyle on June 30, with an enterprise value of €7.7 billion.
- The transaction generated about €5.8 billion in pre-tax cash consideration and a €3.5 billion after-tax disposal gain reflected in second-quarter net income.
- BASF retained a 40% equity stake in the coatings company, Surventis.
- The company also generated more than €800 million of cash proceeds from reducing its Harbour Energy stake below 25%.
Cash flow falls, buyback expands and outlook rises
Chief Financial Officer Dirk Elvermann said first-half EBITDA before special items increased by €715 million to €4.8 billion. Net income rose €4.2 billion to €5.1 billion, including the coatings disposal gain.
Free cash flow for the first half was negative €1.6 billion. In the second quarter, free cash flow fell to negative €189 million from positive €533 million a year earlier, as higher sales lifted receivables and higher raw-material prices increased inventory values. Operating cash flow was also affected by about €200 million of transformation-related spending, including restructuring measures and new ERP systems.
BASF nevertheless maintained its full-year free-cash-flow forecast of €1.5 billion to €2.3 billion, expecting higher collections in the second half and capital spending below its previous €3.4 billion full-year forecast.
The company announced a €1 billion share buyback program scheduled to run from August 2026 through April 2027. It is part of a previously announced plan to repurchase at least €4 billion of shares by the end of 2028. BASF said it had already repurchased around 3.5% of outstanding shares for approximately €1.5 billion between November 2025 and June 2026.
BASF also plans to repay and redeem debt ahead of maturity. Net debt declined €4.2 billion year over year to €17 billion at the end of the second quarter, while the equity ratio increased to 44.6%.
For 2026, BASF raised its EBITDA-before-special-items outlook to a range of €6.9 billion to €7.7 billion. The company retained its €800 million forecast range, citing continued geopolitical uncertainty, and left its CO2 emissions outlook unchanged.
About Basf (ETR:BAS)
BASF SE operates as a chemical company worldwide. It operates through six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care, and Agricultural Solutions. The Chemicals segment provides petrochemicals and intermediates. The Materials segment offers advanced materials and their precursors for applications and systems comprising isocyanates, polyamides, and inorganic basic products, as well as specialties for plastics and plastics processing industries. The Industrial Solutions segment develops and markets ingredients and additives for industrial applications, such as polymer dispersions, resins, additives, electronic materials, and antioxidants for automotive, plastics, paints and coatings, electronics, and energy and resource industries.
