FRANKFURT (Reuters) - Germany's BASF slashed its forecast for 2018 profits on Friday, saying the decline was mainly due to its chemicals segment while low water levels on the Rhine and weak automotive demand especially in China were also to blame.
BASF said in a statement that it now expected earnings before interest and tax before special items (EBIT) to decline by 15-20 percent from last year's 7.6 billion euros (6.84 billion pounds), compared to an earlier forecast of a 10 percent fall.
The chemicals giant became the latest company to admit to the pain being inflicted on Europe's largest economy and leading export nation by mounting trade frictions between the United States and China.
Healthcare company Fresenius has just cut its outlook, sending its shares to their largest one-day fall. Germany's industry-heavy DAX index <.GDAXI> has underperformed its peers and slid into bear-market territory, reflecting its relatively high global exposure.
BASF, based at Ludwigshafen on the Rhine, said in a statement that the profits decline "is mainly attributable to the chemicals segment", where prices for isocyanate - used in making polyurethane polymers and foams - and steam cracker margins were lower than expected.
Low water levels on the Rhine following a summer drought have disrupted river traffic, and were expected to lead to an earnings hit of 200 million euros in the fourth quarter, higher than originally forecast. The negative impact was 50 million in the third quarter.
BASF's business with the automotive industry has continued to decline since the third quarter, in particular with Chinese demand slowing significantly, the company said: "The trade conflict between the United States and China contributed to this slowdown."
The profit warning comes just two weeks after CEO Martin Brudermuller, who took the helm in May, announced a cost-cutting drive to boost annual earnings by 2 billion euros by 2021 to counter slower profit growth.
Under the programme, BASF said it would aim for 3 to 5 percent annual growth in earnings before interest, taxes, depreciation and amortisation (EBITDA) after averaging 8 percent a year since 2012. Analysts called the target disappointing.
BASF shares have declined by 34 percent in the year to date, reducing the company's market value to 56 billion euros ($64 billion).
(Reporting by Douglas Busvine; Editing by Kirsten Donovan and Alison Williams/Adrian Croft)