European chemicals firms downbeat on 2023 prospects
[1/3]The logo of German specialty chemical company Evonik Industries AG is pictured at their plant in Bitterfeld, Germany, February 29, 2016. REUTERS/Fabrizio Bensch//File Photo Acquire Licensing Rights
March 2 (Reuters) - European chemical producers painted a bleak picture of their prospects for 2023 on Thursday, citing the continuing fallout from Russia's invasion of Ukraine, high inflation and slowing economic growth.
Despite energy prices easing since their peak last August and China's reopening offering a potential stimulus, executives stressed that an uncertain geopolitical environment and economic uncertainty were likely to peg back earnings this year.
"Old certainties are gone," Evonik (EVKn.DE) Chief Executive Officer Christian Kullmann said. "It will never be the same again."
Evonik, whose products are used in items from animal feed and diapers to Pfizer/BioNTech's COVID-19 vaccine, forecast a fall in its 2023 core profit.
"The effects of war, high inflation and heavily fluctuating energy prices demanded a lot from us - and they still do," Kullman said.
Switzerland's Clariant (CLN.S), whose chemicals are used in personal and home care products, forecast a decline in 2023 sales. The company sees energy costs edging up in 2023 compared to a year earlier.
Shares in German chemicals maker Covestro (1COV.DE) fell 5% after the company said it expected to make less money in 2023 than the year before.
"That's pretty much the worst result we could have imagined for Covestro," said Arne Rautenberg, fund manager at Union Investment. "Under these conditions, the focus must be all the more on costs."
BASF (BASFn.DE), the world's largest chemicals company, said it would cut 2,600 jobs, halt share buybacks and hike investment to improve competitiveness as it warned of a further decline in earnings due to rising costs.
As well as high costs, BASF chief executive Martin Brudermueller said European chemicals companies were suffering from over-regulation and slow and bureaucratic permitting processes.
Gas prices rocketed in Europe after Russia's war in Ukraine began a year ago. Although they have eased from last August's peak, they remain above historic averages.
Covestro expects energy prices to continuing moving back to more normal levels after tripling within two years, it said, offering some cause for optimism. It added that potential earnings upside could come from EU's answer to the U.S. Inflation Reduction Act (IRA) environmental package.
The European Commission last month proposed allowing increased levels of state aid so that Europe can compete with the United States as a manufacturing hub for electric vehicles and other green products.
A recovery in demand from China will also boost their prospects, analysts said.
In December, Germany's VCI chemical association said it expected the sector's industrial production to further decline in 2023, as the Ukraine war and supply bottlenecks are set to further hamper activity. Germany is Europe's largest producer of chemicals.
German inflation rose more than anticipated at 9.3% in February, data from the federal statistics office showed on Wednesday, pointing to no let-up in price pressures.
Reporting by Bartosz Dabrowski, Andrey Sychev, and Tristan Chabba in Gdansk; Editing by Matt Scuffham
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