European chemical companies are pessimistic about 2023

Share your love

European chemical makers on Thursday painted a gloomy outlook for 2023, based on the continued fallout from Russia’s invasion of Ukraine, high inflation and slowing economic growth.

Despite energy prices falling from last August’s peak and China’s reopening may be a stimulus, executives stressed that the precarious geopolitical environment and economic uncertainty are likely to limit profits this year.

“The old certainties have disappeared,” said Christian Kullmann, CEO of Evonik (ETR:EVKn). “It will never be the same again.”

Evonik, whose products are used in feed, diapers and the Pfizer/BioNTech COVID-19 vaccine, expects its EBITDA to fall in 2023.

“The effects of the war, high inflation and the sharp fluctuation of energy prices demanded a lot from us, and continue to do so,” Kullman said.

Switzerland’s Clariant (SIX:CLN), whose chemicals are used in personal and household care products, forecasts sales to decline in 2023. The company estimates that energy costs will increase in 2023 compared to the previous year.

The shares of the German chemical manufacturer Covestro (ETR:1VOC) fell 5% after the company said it expected to make less money in 2023 than the previous year.

“It’s pretty much the worst outcome we could have imagined for Covestro,” said Arne Rautenberg, fund manager at Union Investment. “Under these conditions, the focus should be on costs even more.”

BASF (ETR:BASFN), the world’s largest chemical company, said it would cut 2,600 jobs, halt share buybacks and increase investment to improve competitiveness, while warning of a further decline in profits due to rising costs.

In addition to high costs, Martin Brudermueller, CEO of BASF, said European chemical companies suffer from overregulation and slow and bureaucratic permitting processes.

Read Also   "Let's smash these things now!": Dozens of illegal motorcycles are destroyed in New York (VIDEO)

Gas prices soared in Europe following the start of Russia’s war in Ukraine a year ago. Although they are down from last August’s peak, they are still above historical averages.

Covestro expects energy prices to continue returning to more normal levels after tripling in two years, he said, offering some reasons for optimism. He added that the EU’s response to the US Inflation Reduction Act (IRA) package could lead to increased profits.

The European Commission proposed last month to allow higher levels of state aid so that Europe can compete with the United States as a manufacturing hub for electric vehicles and other green products.

The recovery in Chinese demand will also boost its outlook, analysts say.

In December, the German chemical association VCI said it expects the sector’s industrial output to continue to decline in 2023, as Ukraine’s war and supply bottlenecks will make activity even more difficult. Germany is Europe’s largest producer of chemicals.

German inflation rose more than expected to 9.3 percent in February, data from the Federal Statistics Office showed on Wednesday, suggesting price pressures will not subside.

Share your love

Leave a Reply

Your email address will not be published. Required fields are marked *