Basf (ETR:BAS) said second-quarter earnings rose sharply as higher prices, volume growth and lower cash fixed costs lifted results across most of its businesses, prompting the chemicals group to raise its full-year EBITDA outlook.
CEO Markus Kamieth said EBITDA before special items increased 54% year over year to €2.4 billion in the second quarter, exceeding consensus expectations. He attributed the improvement to stronger specific margins, continued volume growth and cost reductions, with all segments except Surface Technologies posting earnings growth.
Pricing, volumes and regional trends
BASF said lower raw-material prices, including naphtha and natural gas, had pressured selling prices at the start of the year. The trend reversed during the second quarter after the escalation of conflict in the Middle East and the blockade of the Strait of Hormuz. The company said it implemented significant price increases, particularly in upstream operations.
Volumes increased considerably during the first half, aided by the ramp-up of BASF’s new Verbund site in Zhanjiang, China. Kamieth said the company maintained uninterrupted supply through its local-for-local production network, flexible-feed steam crackers and trading operations that sourced key feedstocks.
The company reported considerable volume growth in Greater China and Asia-Pacific excluding Greater China, while Europe recorded volume growth across all core businesses. North American volumes were slightly lower, reflecting a scheduled turnaround at the Port Arthur steam cracker. In South America, Africa and the Middle East, volumes rose significantly, led by Agricultural Solutions, Chemicals and Industrial Solutions.
Kamieth said European volume growth approached 6% in the second quarter and was broad-based, although automotive-related businesses remained weaker. He said BASF had seen some earlier customer purchasing to secure supply amid geopolitical uncertainty, but added that July trends remained consistent with the second quarter and the company had not observed demand destruction.
Segment performance and Agricultural Solutions
Materials posted a considerable earnings increase as higher contribution margins and lower fixed costs benefited both divisions, with the polyurethane and ammonia value chains making the largest contributions. Chemicals also improved significantly, mainly on higher margins in Petrochemicals, although maintenance turnarounds in Ludwigshafen and at Port Arthur weighed on the result.
Industrial Solutions benefited from lower fixed costs in Performance Chemicals and higher contribution margins in Dispersions & Resins. Nutrition & Care earnings were slightly above the prior-year level, helped by lower fixed costs in Care Chemicals.
Surface Technologies was the sole segment with lower earnings. BASF cited weaker Precious Metal Services earnings and the expiry of subsidies in Battery Materials, which increased fixed costs. Higher earnings in emission catalysts partly offset the decline in Precious Metal Services.
Agricultural Solutions reported volume growth in every region during the first half, particularly in fungicides, herbicides and seed treatment. Sales declined slightly because of currency effects and lower prices, but EBITDA before special items nearly matched the prior-year first-half level. The segment’s EBITDA margin before special items was 29%.
Elvermann said the company expected Agricultural Solutions’ third-quarter earnings to meet or exceed the prior-year quarter despite challenging weather conditions, farmer income and commodity-price trends. He noted that some second-quarter South American sales had been brought forward ahead of an ERP system conversion, meaning those volumes would not recur in the third quarter. BASF continues to target IPO readiness for Agricultural Solutions by mid-2027.
Cost reductions, portfolio actions and capital allocation
BASF said it had reduced its workforce by approximately 7,000 employees between January 2024 and June 2026, excluding changes from divestitures and hiring for the Zhanjiang site. In May, full-time-equivalent positions at BASF SE in Ludwigshafen fell below 30,000 for the first time since 1954.
The company said the proportion of highly competitive production units at Ludwigshafen rose to 88% from 78% since 2024. BASF expects to achieve annual cost savings of around €2.3 billion by the end of 2026 and said it had reached an annual run rate of €2 billion at the end of June.
In addition, BASF aims to reduce net cash fixed costs in its core businesses by up to 20% by 2029 compared with 2024 under its CoreShift program. Core net cash fixed costs were down 4% in the first half, adjusted for currency, portfolio and one-time effects.
The company completed its Coatings transaction with Carlyle on June 30. The transaction had an enterprise value of €7.7 billion and delivered approximately €5.8 billion in pre-tax cash consideration. BASF recorded a €3.5 billion after-tax disposal gain in second-quarter net income and earnings per share, while retaining a 40% equity stake in Surventis.
BASF also accelerated the sale of its Harbour Energy holding, generating more than €800 million in cash proceeds since March and reducing its stake to below 25% of voting shares. Its remaining stake was worth roughly €1 billion, according to the company.
Net income for the first half rose €4.2 billion to €5.1 billion, including the Coatings disposal gain. Free cash flow was negative €1.6 billion for the period. Second-quarter free cash flow was negative €189 million, compared with positive €533 million a year earlier, as higher sales and raw-material prices increased working-capital needs.
Outlook and shareholder returns
BASF raised its 2026 EBITDA before special items forecast to between €6.9 billion and €7.7 billion, retaining an €800 million range because of geopolitical uncertainty. It maintained its full-year free-cash-flow outlook of €1.5 billion to €2.3 billion, saying higher earnings and lower capital expenditures should offset the working-capital buildup.
The company said it expects payments for property, plant and equipment and intangible assets to come in below the previously forecast €3.4 billion for the year. It also plans to reduce capital expenditures by 20% over the next four years and expects CapEx to remain below depreciation through 2028.
BASF paid a €2.25-per-share dividend for 2025 in May and announced a new €1 billion share repurchase program to run from August 2026 through April 2027. The program is part of a previously announced plan to repurchase at least €4 billion of shares by the end of 2028. Between November 2025 and June 2026, the company repurchased about 3.5% of its outstanding shares for roughly €1.5 billion.
The company said net debt declined €4.2 billion to €17 billion at the end of the second quarter, while its equity ratio improved to 44.6%. BASF said it continues to hold a single-A credit rating.
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.
