ForFarmers, BASF earnings hit due to water level related logistical challenges, among other factors

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Hans Blossey
© GettyImages/Hans Blossey

Related tags: Logistics, Earnings before interest and taxes, Basf, China

ForFarmers has announced that its underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2018 would show a modest decline compared to 2017.

The Dutch compound feed manufacturer issued an additional trading update today.

As already indicated in its Q3 trading update of November 1, it again said the effects of the hike in raw material and energy prices could not immediately be passed on to its customers. It said it also faced higher inbound logistics costs, particularly in the Netherlands and Germany, due to low water levels.

Both these effects also impact the results of the fourth quarter of 2018. In the second half of the year, ForFarmers' share in the higher inbound logistics costs amounted to €2m, which were not passed on to customers.”

However, the company today said the waterways have recently become navigable again so now all mills that are located on a river or canal can again be reached by vessel.

ForFarmers also stressed, as it had done in the previous trading update, the integration of the company’s latest acquisitions has resulted in additional costs.

“It is expected that these integration activities, and their related costs, will last for approximately 12 months from the date of acquisition.”

The company said, since its listing in 2016, it has been providing a medium term guidance, of an on average annual increase in underlying EBITDA, in the mid-single digits at constant currencies, excluding the impact of significant acquisitions such as Tasomix and barring unforeseen circumstances.

“Due to the volatility of energy and raw materials prices, ForFarmers' results may deviate from its average guidance in any given year.”

ForFarmers said it would publish its annual results on March 13 2019.

Low water level of the Rhine

German chemical group, BASF, is also forewarning of lower earnings, citing among other events, the low water level of the Rhine as a factor.

It released a revised financial outlook earlier this month, on December 7.

Based on its earnings data for November 2018, it also now expects a considerable decrease in income from operations (EBIT) before special items for the fiscal year 2018 in the range of 15% to 20% compared with the prior year - EBIT before special items in 2017 was €7,645m.

BASF previously forecast a slight decline of up to 10% compared with the prior-year figure.

In terms of the EBIT of the BASF Group, the company said it continues to expect a considerable decline and for sales, a slight increase of up to 5%.  

The significant decline in EBIT before special items compared with the prior-year figure is mainly attributable to the chemicals segment. In particular, isocyanate prices fell more sharply, and steam cracker margins were lower than expected.

“In addition, the low water level of the Rhine River in the fourth quarter of 2018 is expected to lead to negative earnings impacts of up to €200m, higher than previously forecast.

"In the third quarter of 2018, the negative earnings impact from the low water level of the Rhine could be limited to around €50m.”

It said its business with the automotive industry has continued to decline since the third quarter of 2018; in particular, demand from customers in China slowed significantly. The trade conflict between the US and China contributed to this slowdown.

 

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