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Introduction & Market Context
BASF SE presented its third-quarter 2025 results on October 29, revealing a slight decline in financial performance amid challenging market conditions, while announcing significant strategic initiatives including a major divestiture and accelerated share buyback program. The German chemical giant reported an EBITDA before special items of €1.54 billion, down 4.8% from €1.62 billion in the same period last year, as currency headwinds and lower prices offset modest volume growth.
The company’s presentation highlighted its strategic repositioning efforts amid a chemical industry facing overcapacity challenges, particularly in China. Despite these headwinds, BASF maintained its dividend commitment while unveiling plans to unlock value through portfolio optimization.
Quarterly Performance Highlights
BASF’s Q3 2025 sales declined by 3.2% year-over-year, primarily due to negative currency effects (-3.9%) and lower prices (-1.7%), partially offset by volume growth of 1.5%. The company’s performance varied significantly across segments, with Surface Technologies and Agricultural Solutions showing strength while traditional chemical businesses faced pressure.
As shown in the following chart detailing sales and EBITDA development:
The EBITDA before special items has shown a declining trend throughout 2025, falling from €2.63 billion in Q1 to €1.77 billion in Q2, and further to €1.54 billion in Q3. This quarter’s performance was particularly impacted by weaker results in the Chemicals, Materials, Industrial Solutions, and Nutrition & Care segments.
The following segment performance snapshot illustrates the varied market conditions across BASF’s portfolio:
Surface Technologies emerged as a bright spot with both market environment and volumes trending upward, while Agricultural Solutions also showed positive momentum. Conversely, the Chemicals segment faced the most challenging conditions with both market environment and margins declining.
The EBITDA bridge below provides a clear picture of how each segment contributed to the year-over-year change:
Surface Technologies delivered the strongest positive contribution with a €179 million increase, followed by Agricultural Solutions with a €31 million improvement. However, these gains were more than offset by declines across other segments, particularly Industrial Solutions (-€88 million), Chemicals (-€80 million), and Materials (-€76 million).
Strategic Initiatives
The most significant announcement in BASF’s presentation was the binding agreement with Carlyle regarding the company’s coatings business. This transaction, valued at €7.7 billion, represents a major step in BASF’s strategy to unlock value from its standalone businesses.
As illustrated in the transaction overview:
Under the agreement, Carlyle will acquire a 60% stake in the business, while BASF will retain a 40% equity position. Upon closing, expected in Q2 2026, BASF will receive pre-tax cash proceeds of approximately €5.8 billion while maintaining significant exposure to future value creation potential.
The company also provided an update on its Zhanjiang Verbund site in China, a cornerstone of its Asian growth strategy:
BASF reported that the mechanical completion of the steam cracker was achieved in October 2025, marking a significant milestone. Through "tight budgetary discipline and procurement excellence," the company reduced the total capital expenditure for the project by €1.3 billion to €8.7 billion. However, BASF tempered expectations for near-term earnings contributions from the site, citing "currently long markets" that will likely result in a slower ramp-up than initially projected.
Capital Allocation Strategy
BASF outlined a comprehensive approach to capital allocation, balancing shareholder returns with strategic investments and balance sheet management:
In a significant acceleration of its shareholder return plans, BASF announced it would begin share buybacks earlier than previously communicated:
The company plans to repurchase up to €1.5 billion in shares by the end of June 2026, considerably earlier than the original timeline of 2027-2028. This decision was attributed to "considerable cash proceeds already received" from various divestitures, including the Brazilian decorative paints business and food and health performance ingredients business.
BASF also confirmed its commitment to an ordinary dividend of at least €2.25 per share annually, while emphasizing that large acquisitions are "currently not in focus" as the company prioritizes deleveraging its balance sheet.
Forward-Looking Statements
BASF maintained its adjusted outlook for 2025, projecting EBITDA before special items in the range of €6.7-7.1 billion, reflecting the technical adjustment for the coatings business classification as discontinued operations:
The company’s guidance is based on stable macroeconomic assumptions, including global GDP growth of 2.0-2.5%, industrial production growth of 1.8-2.3%, and chemical production growth of 2.5-3.0%. BASF also assumes an average euro/dollar exchange rate of $1.15 and an average annual oil price of $70 per barrel.
Free cash flow expectations remain unchanged at €0.4-0.8 billion for the full year, despite the negative €868 million recorded in the first nine months of 2025:
The third quarter showed improvement in this metric, with free cash flow turning positive at €398 million, though still below the €569 million generated in Q3 2024. Cash flows from operating activities decreased primarily due to cash tied up in other operating assets, while capital expenditures declined year-over-year.
Detailed Financial Analysis
BASF provided a comprehensive view of its financial performance, both including and excluding the coatings business now classified as discontinued operations:
Excluding discontinued operations, BASF reported Q3 2025 sales of €14.33 billion, down 3.3% from the restated 2024 figure of €14.82 billion. EBITDA before special items on this basis was €1.43 billion, representing a 3.2% decline from the prior year. Net income fell significantly to €172 million, down 39.9% from €287 million in Q3 2024.
The year-to-date financial summary further illustrates the challenging operating environment:
For the first nine months of 2025, BASF recorded EBITDA before special items of €5.94 billion, down €350 million from the prior year period. The EBITDA margin before special items (excluding metals) stood at 13.6%, a slight decrease of 0.3 percentage points. Net income declined substantially to €1.06 billion, down €1.03 billion year-over-year, while operating cash flow decreased by €1.52 billion to €1.97 billion.
As BASF continues its strategic transformation amid challenging market conditions, the company’s focus on portfolio optimization, disciplined capital allocation, and operational efficiency will be crucial in navigating the evolving chemical industry landscape and delivering long-term shareholder value.
Full presentation:
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