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by Petra Maier, Euro am Sonntag
The mood in the economy continues to improve. This is shown by the Ifo business climate index, which improved for the fourth time in a row in August. When the economy picks up again, stocks of economically sensitive companies tend to win. This also includes the shares of the chemical world market leader BASF.
In the first half of the year, the Ludwigshafen-based customers held back. In particular, the poor performance of the basic chemicals business weighed on the figures. Starting from weak values, the growth rates should accelerate in the second half of the year with the improved prospects in this area.
Agricultural sector with potential
In addition, BASF has a few arrows in its quiver that could also support the share price. One is agrochemistry. The business already contributes around 30 percent to consolidated sales and around 20 percent to the operating result. The optimization of the area after the acquisitions has not yet ended. The contribution to earnings could increase significantly in the coming quarters. BASF has just received approval for another crop protection product with the active ingredient Revysol in Germany. The mushroom remedy Balaya is scheduled to hit the market in spring 2021. It would be the third approved product with the active ingredient Revysol, which was launched at the end of 2019. BASF believes the fungicide will have sales potential of more than one billion euros. A newly developed weed killer is also to be established from the mid-2020s. If everything goes as planned, the Ludwigshafen-based company will be on the market with more than 30 new products by 2028, which together could generate more than 7.5 billion euros.
The efficiency and cost saving program launched last year is also continuing. The sale of the construction chemicals business for 3.17 billion euros and that of the pigments business for 1.15 billion euros are due to take place this year. The initial public offering of the subsidiary Wintershall Dea is still on the agenda.
The DAX share fell in April to its lowest level in ten years. The subsequent recovery is steady, but has so far been weaker than the broader market. There is still a gap of around 20 percent compared to before the slump in March. Investors who are very willing to take risks can also leverage the profit potential.
The share of the world market leader showed a slight weakness even before the Corona crisis. Because the company is heavily involved in China, the slump came earlier. Since the low, the value has recovered somewhat, now consolidated at prices around 50 euros. The important 200-day line, which runs below 55 euros, must be regained. Then the share can rise to 60 euros.
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Image sources: BASF, BASF SE