Revenue turns positive for the first time in three years! BASF Q2 performance surges.

On July 15, global chemical leader BASF released its second-quarter operating data and raised its full-year 2026 profit forecast, ending a downturn of 14 consecutive quarters of declining revenue. Meanwhile, domestic and international leading chemical companies such as Wanhua Chemical, Covestro, and Evonik saw significant simultaneous improvements in their semi-annual performance forecasts. The global chemical industry is entering a window of phased performance recovery, but this round of warming is dominated by product price increases driven by geopolitical conflicts; terminal consumer demand has not yet fully recovered, and the global chemical supply landscape is undergoing a profound reshaping.

I. BASF Raises Full-Year Profit Range, Q2 Performance Rebounds Significantly

BASF's announcement revealed that benefiting from product price increases and gains from asset disposals, the company raised its full-year operating targets: the 2026 EBITDA forecast excluding special items was raised from the original 6.2—7.0 billion euros to 6.9—7.7 billion euros; the free cash flow guidance remains unchanged at 1.5—2.3 billion euros. Rising raw material prices occupying working capital is the core factor putting pressure on cash flow.

The company simultaneously issued a risk warning, stating that uncertainty in the global chemical market remains high in the second half of the year, with core variables concentrated on US-Iran diplomatic negotiations and the smooth flow of shipping through the Strait of Hormuz. The Middle East is the core export region for global energy and petrochemical raw materials; if this waterway is blocked for a long time, it will comprehensively suppress the global economy and the chemical industry chain; conversely, if a stable cooperation framework is quickly reached, it will provide additional support for industry growth.

Core operating data for Q2 warmed up across the board

1. Sales: Estimated at 17.2 billion euros, a year-on-year increase of 16%. Price increases contributed 11 percentage points, sales volume growth contributed 7 percentage points, while exchange rates and asset divestments each offset 1 percentage point of growth. Since the fourth quarter of 2022, BASF has seen year-on-year revenue declines for 14 consecutive quarters; this marks the first time in over three years that single-quarter revenue has turned positive.

2. Profitability Indicators: EBITDA excluding special items is estimated at 2.4 billion euros, compared to only 1.6 billion euros in the same period last year; profitability improved across all business segments except the Surface Technologies segment. EBIT reached 1.5 billion euros, doubling year-on-year. Net profit is estimated at 4.1 billion euros, compared to only 79 million euros in the same period of 2025. The large difference is mainly due to the sale of the coatings business completed on June 30, which brought a pre-tax disposal gain of 3.9 billion euros, with related taxes in the mid-single-digit millions of euros.

3. Free Cash Flow: Stood at -200 million euros, turning from positive to negative compared to 530 million euros in the same period last year. Rising upstream raw material prices squeezed liquidity, and operating cash flow of 500 million euros was insufficient to cover 700 million euros in capital expenditure on fixed assets and intangible assets.

In March of this year, affected by disturbances from the US-Iran geopolitical conflict, international chemical raw material prices fluctuated violently. BASF significantly raised prices for multiple types of chemicals, including MDI and nylon, with some categories rising by up to 30%, directly thickening corporate profit margins.

II. Industry Continues in Pains: BASF Advances Cost Reduction, Capacity Clearance, and Strategic Eastward Shift

In previous years, the global chemical industry was deeply mired in a down cycle, with a weak global economy and overcapacity in petrochemicals suppressing industry profits. Statistics from industry media C&EN show that in 2025, the total sales of the global top 50 chemical companies was $965.8 billion, a year-on-year decline of 5.8%, with 39 companies seeing year-on-year revenue declines.

To cope with the industry downturn, BASF has continuously implemented aggressive reform plans:

1. Large-scale Cost Cutting and Layoffs: Multiple rounds of cost-cutting plans have been implemented, with an annual normalized cost reduction target of 2.3 billion euros. High-energy-consuming and old facilities for TDI, caprolactam, adipic acid, and synthetic ammonia have been shut down; 2,600 jobs have been cut globally, and 700 production positions have been reduced at the Ludwigshafen site in Germany.

2. Divesting Non-core Assets: Completed the sale of the coatings business for 7.7 billion euros to Carlyle Group; plans to spin off and list the Agricultural Solutions division separately by 2027, while simultaneously seeking external strategic partners for the Battery Materials business.

3. Doubling Down on the China Market: Implemented the largest single investment in the group's history——the 8.7 billion euro Zhanjiang Integrated Base, shifting the center of capacity and investment to Asia to hedge against the disadvantage of high energy costs in Europe.

III. Collective Performance Recovery of Domestic and International Chemical Giants in the First Half

Not only BASF, but the operating data for multiple domestic and international chemical giants showed significant improvement in the first half of the year:

1. Evonik (Forecast on June 26): Q2 EBITDA expected to be 600—650 million euros, a year-on-year increase of 23%. Core drivers are a simultaneous rise in product volume and price combined with continuous cost reduction.

2. Wanhua Chemical (Announcement on July 6): Net profit attributable to shareholders for the first half of 2026 is 9.8—10.4 billion yuan, a year-on-year increase of 60.05%—69.85%. The profitability of the domestic chemical leader is climbing steeply.

3. Covestro (Preliminary Data on July 9): First-half sales were 6.729 billion euros, a slight year-on-year decline; EBITDA was 669 million euros, a large increase of over 60% compared to 407 million euros in the same period last year. Product price increases offset the pressure of lagging raw material price hikes.

Semi-annual performance forecasts released by domestic refining and chemical leaders such as Rongsheng Petrochemical, Hengli Petrochemical, Dongfang Shenghong, Hengyi Petrochemical, Tongkun Holding, and Xinfeng Ming also present a trend of recovering profitability.

IV. Underlying Industry Logic: Price Increase Dividend Supports Performance, Global Chemical Pattern Accelerates Reconstruction

There are obvious shortcomings in the current performance recovery of the chemical industry: downstream terminal demand in sectors such as automobiles, home appliances, and real estate has not recovered in sync. This round of profit repair is not driven by real demand expansion, but by a passive price increase dividend brought about by geopolitical conflicts pushing up raw material and chemical product prices; the foundation for industry growth is not solid.

In this special cycle, the global chemical supply landscape is being reshaped: European and American chemical companies are accelerating the elimination of high-cost local capacity, reducing operating pressure through asset divestment and strategic eastward shifts; while Chinese chemical companies rely on a complete industrial chain, stable supply chain, diversified raw material supply, and integrated scale cost advantages to quickly fill the market gaps left by the clearance of overseas capacity.

Industry analysis believes that in the medium and long term, the ability to balance production costs, independent controllability of core technologies, and supply chain security will become the key for chemical companies to widen the gap in the next round of cyclical competition.