Sunday, May 14, 2017

BASF annual report 2016

Front page of the annual 2016 report from BASF

I have a love/hate relationship to BASF. The "hate" started back in 2007 when I was refused a job with them due to that I completely crashed with the big boss of that department. As an old, old chemist he did not know about IUPAC rules for how to name compounds and as a wet behind the ears chemist I did not know the trade names of various compounds. It is just one of those moments in life when things went wrong. Already back then they had an extremely good hiring procedure and a lot of money was invested in trying to make sure that they hired the correct person but looking back they probably had one issue and that was that if the big boss says no then the person will not be hired. Today, in other professional companies, employees can get hired based on the HR department. Some bosses wants people that says yes and agree to everything they say but it is destructive for the company and hence HR should every now and then step in and make the decision when weak bosses are trying to have their way. One of my friends where hired like that via the HR but against the direct line manager and he have had the good fortune of having a splendid career which simply comes form him being excellent and people pushing careers often do not stay longer than 1 to 2 years in one place. Anyway...

After my incident with BASF I had a dislike towards them and their pompous employees / bosses. Afterwards in my career I ended up working with them and I must admit that I enjoy that. They are good and their slogan THE chemical company is correct. They do a lot of good stuff and they should be better known among people but it is hard when you are so focused on B2B sales.

For the report in full please go here and for the latest summary which was the BASF annual report 2015 then please click on that link and to find out more about The Chemical Company then please visit analysis of BASF 2015.

In the financial statement below we can see that they sales dropped like crazy! With a minus of almost 20% it is bad, bad news. The beautiful thing though is that A. they did not have a party and B. they managed to control their costs which leads to a fairly good earning at the bottom line. Sure compared to 2015 they are only up less than 2% in earnings but comparing that to the sales loss then it is pretty impressive! The earnings per share ended up at 4.3 € and they are paying out 3 € in dividends which means that they are confident in the future.

Financial statement of BASF 2016

Conclusion: BASF had another bad year which comes to a very large extent from their oil and gas business. last year they sold for well over 10 billion € and this year they were down at a bit over 2 billion €. A massive change! I might be wrong but to me that looks as if when they are not making any money they simply close the tap to keep the oil and gas until prices reach a more acceptbale level. If that is true then I personally fully agree with that behaviour. I will continue to be a shareholder in BASF.


Anonymous said...

I've had a look at this company and it seems to be a quality business. The topline problem is worrying. There is a limit to what you can do with just efficiency and cost control, after that you will have to grow sales. At €90 it looks expensive, but if I could get my hands on it at 70 I would certainly consider it.

Fredrik von Oberhausen said...

BASF is indeed quality and currently they are doing interesting changes. I fully agree on that they are expensive today and I would not run out and buy them but they are also not so extremely overvalued that I will run out and sell the shares that I have. I got mine at 64 € which was a very good price back then.