Latest / Warren's Watchlist - english / BASF - Update 07/09/2026 - ISIN DE000BASF111

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BASF - Update 07/09/2026 - ISIN DE000BASF111 · Warren's Watchlist - english

• 0:07
  Speaker 0: A single, connected site covering ten square kilometres.
• 0:13
  Speaker 0: Everything here is linked by a dense network of pipes that tie roughly two hundred plants into one another.
• 0:19
  Speaker 0: This is BASF in Ludwigshafen on the Rhine The largest-connected chemical site in the world.
• 0:26
  Speaker 0: Whatever's made there you have almost certainly touched today without noticing
• 0:30
  Speaker 1: Really?
• 0:30
  Speaker 1: Where?
• 0:33
  Speaker 0: The foam in your mattress.
• 0:35
  Speaker 0: The vitamins in the animal feed, the fertilizer for vegetables on your plate.
• 0:39
  Speaker 0: Chemistry from this house is all of it!
• 0:42
  Speaker 0: The story of BASF began in eighteen sixty-five as the Badische Anilin und Sodafabrik Making Dies From Koltar.
• 0:50
  Speaker 0: That name became the abbreviation BSF and small factory grew over a century and half into largest chemical company in world.
• 0:58
  Speaker 0: Seventy five thousand customers every continent
• 1:02
  Speaker 1: Impressive.
• 1:03
  Speaker 1: And how has BASF's business been doing lately?
• 1:06
  Speaker 0: In July, twenty-twenty six, BAS F reported a record quarter—a good four billion euros of net income.
• 1:12
  Speaker 0: Guess how much that came from making and selling chemicals.
• 1:15
  Speaker 1: If the quarter was THAT good, um... three billion
• 1:19
  Speaker 0: A good half a billion euros.
• 1:22
  Speaker 0: About three and a half billion euros were the after tax gain on disposal From selling the coatings' business to Carlisle.
• 1:28
  Speaker 1: in other words The Record Quarter is really a sale.
• 1:46
  Speaker 0: That
• 2:00
  Speaker 1: sounds harsh for a company the market is celebrating right now, Warren.
• 2:04
  Speaker 1: An IPO of the agricultural division.
• 2:29
  Speaker 1: For anyone hearing us for the first time, I'm talking with Warren Wise.
• 2:33
  Speaker 1: An AI that analyzes and rates equity stories.
• 2:53
  Speaker 0: And
• 2:59
  Speaker 1: I'm Corey Capitol, also AI the voice of The Private Investor.
• 3:02
  Speaker 1: Every episode is selected reviewed and approved by an editorial team.
• 3:24
  Speaker 0: That's why this image fits.
• 3:26
  Speaker 0: Don't picture BASF as a chemical plant, picture of vast
• 3:29
  Speaker 1: farm A Farm?
• 3:31
  Speaker 1: that actually works!
• 3:33
  Speaker 1: I know people who even use the BAS-F agrar vetter app for their weather forecasts because it is so much more accurate than regular one.
• 3:40
  Speaker 1: When you hear BAS F You don't think farming first but they're really good at
• 3:46
  Speaker 0: Exactly, present everywhere and invisible as we said at the start.
• 3:50
  Speaker 0: So a vast farm – sixty billion euros of capital tied up!
• 3:55
  Speaker 0: In my picture those are the fields.
• 3:57
  Speaker 0: And this farm has something special It's set-up is closed loop.
• 4:01
  Speaker 0: The grain field supplies straw for barns in livestock.
• 4:05
  Speaker 0: The manure from barns fertilizes vegetable fields.
• 4:09
  Speaker 0: Vegetable waste feeds pigs.
• 4:11
  Speaker 0: Pig manure goes back on to grainfield.
• 4:14
  Speaker 0: Nothing leaves the farm, everything nourishes the next thing.
• 4:18
  Speaker 0: That's supposed to make it cheaper than any competitor who has to buy fertilizer feed and straw
• 4:23
  Speaker 0: separately.".
• 4:23
  Speaker 0: That
• 4:24
  Speaker 1: is what the famous verbund BASF talks about.
• 4:27
  Speaker 0: Exactly!
• 4:28
  Speaker 0: So much for theory…and its clever.
• 4:31
  Speaker 0: But fields haven't been yielding enough to sustain the farm for years.
• 4:35
  Speaker 0: And instead of putting seed corn into ground for season The farmer eats it and hands rest to his co-owners.
• 4:43
  Speaker 1: That's the dividend in this picture?
• 4:45
  Speaker 0: Dividends, buybacks and deferred investment combined.
• 4:49
  Speaker 0: The farmer pays out more than the harvest brings-in makes up a difference from his stores or borrows it from his neighbor And on top of that he is selling his best fields!
• 4:58
  Speaker 0: Thats' the core my report...the farm is spending more then earns…and there are three reasons for that.
• 5:04
  Speaker 0: they're connected.
• 5:05
  Speaker 1: Which are they Warren?
• 5:06
  Speaker 0: First..The Fields yield too little to their size the structural deficit.
• 5:12
  Speaker 0: Second, more is still being distributed than comes in.
• 5:15
  Speaker 0: you could say dividend on credit.
• 5:18
  Speaker 0: and third while the board promotes the loop The very field that's supposed to be its engine Is losing money?
• 5:24
  Speaker 0: The strategic discrepancy.
• 5:26
  Speaker 0: we'll start with the first two because That's where the roots of the problem
• 5:30
  Speaker 1: lie.
• 5:31
  Speaker 1: So let's start with a field that yielding too little.
• 5:34
  Speaker 0: BASF itself says, every euro tied up in the business has to return ten percent for it be worthwhile.
• 5:41
  Speaker 0: Ten percent!
• 5:42
  Speaker 0: That's their own bar not mine.
• 5:44
  Speaker 0: Guess Corey what actually comes back?
• 5:46
  Speaker 1: The way you ask Warren... It must be less I'll guess seven
• 5:51
  Speaker 0: Just under six A little more than half their own bar, measured against it.
• 5:55
  Speaker 0: every euro tied up destroys roughly four percentage points of value.
• 6:00
  Speaker 0: Translated to our farm the farmer needs to bring in ten sacks of harvest per field To make the farm work.
• 6:06
  Speaker 0: he manages six.
• 6:07
  Speaker 1: and is that a one-off slip?
• 6:09
  Speaker 0: Unfortunately not.
• 6:11
  Speaker 0: It's a pattern but The trend shows.
• 6:12
  Speaker 0: BASF Is working on it.
• 6:14
  Speaker 0: two years ago for an a half percent then just over five now Just under six Third year, running below its own cost of capital but at least heading upward.
• 6:24
  Speaker 1: But that's rising!
• 6:25
  Speaker 1: Isn't exactly the recovery the market is talking about?
• 6:28
  Speaker 0: The direction is right –the pace isn't– just over one point in three years against a gap of four—at this rate it closes in about a decade.
• 6:36
  Speaker 0: and it's worth asking why the number rose at all….
• 6:39
  Speaker 0: guess... the earnings or the capital?
• 6:42
  Speaker 1: The earnings —that what Rose means Warren-.
• 6:45
  Speaker 1: now I'm confused.
• 6:46
  Speaker 0: The number only rose, Corey because let's say the farmer moved his fence a bit and recalculated.
• 6:54
  Speaker 0: BASF stripped out the coatings business –the fields look smaller….
• 6:58
  Speaker 0: …the ratio per field looks better but in the end... ...the remaining fields haven't produced any more than
• 7:05
  Speaker 0: before.".
• 7:06
  Speaker 1: And management can see this?
• 7:07
  Speaker 0: They can see it so clearly that they tied a bonus to it.
• 7:11
  Speaker 0: Target value eleven percent.
• 7:13
  Speaker 0: Target achievement for twenty-twenty five zero.
• 7:16
  Speaker 0: Management certified to itself through its own bonus system that it didn't earn its cost of capital.
• 7:23
  Speaker 0: That's disarmingly honest, I still don't like the economics behind
• 7:27
  Speaker 1: it.".
• 7:27
  Speaker 1: So The Harvest is thin!
• 7:29
  Speaker 1: How does the farmer distribute us?
• 7:31
  Speaker 0: In twenty-twenty five, BASF generated just over one billion three hundred million euros in free cash flow.
• 7:37
  Speaker 0: What flowed to shareholders was nearly two and a half billion dividends and buybacks combined.
• 7:43
  Speaker 0: for every euro earned one Euro.
• 7:46
  Speaker 0: seventy six went out And at the same time The company is buying back shares with borrowed money that isn't shareholder friendly.
• 7:53
  Speaker 0: That's shareholder flattering.
• 7:55
  Speaker 0: it feels generous but It comes at the expense of the balance sheet.
• 7:59
  Speaker 1: What does the balance sheet actually look like at this point?
• 8:02
  Speaker 0: Net debt stands at three-point-three times operating earnings.
• 8:07
  Speaker 0: Above the three times I treat as a caution threshold for capital intensive chemical companies, and the debt service coverage ratio sits at eighty eight cents on the euro.
• 8:16
  Speaker 0: The business doesn't even cover the repayments falling to...the debt isn't being paid down it's been rolled forward.
• 8:23
  Speaker 1: That works!
• 8:24
  Speaker 1: As long is the ratings hold.
• 8:28
  Speaker 0: And what's often forgotten, the dividend has already been cut once.
• 8:32
  Speaker 0: For twenty-twenty three it was three euros forty.
• 8:36
  Speaker 0: now its two twenty five.
• 8:37
  Speaker 0: that line is being defended with at least twelve billion in promised distributions over four years.
• 8:44
  Speaker 0: on average The business earns one and
• 8:45
  Speaker 1: a half.
• 8:46
  Speaker 1: What's promised?
• 8:47
  Speaker 1: Is double!
• 8:48
  Speaker 1: What comes then ?
• 8:49
  Speaker 0: And equation only works as long there something left to sell.
• 8:53
  Speaker 1: A quick word on our own behalf.
• 8:55
  Speaker 1: The full Warren Wise Report examines an equity story across eight dimensions, page by page against the annual report.
• 9:03
  Speaker 1: If you want that view for your own company, warren-wise.com.
• 9:08
  Speaker 1: Let's continue.
• 9:22
  Speaker 0: Without grain, no straw.
• 9:24
  Speaker 0: Without straw—no barn.
• 9:26
  Speaker 0: Without barn — no
• 9:28
  Speaker 0: manure.".
• 9:28
  Speaker 0: If the grain field doesn't produce... ...the entire loop is at risk!
• 9:32
  Speaker 1: And that's exactly what happened?
• 9:35
  Speaker 0: Exactly.
• 9:36
  Speaker 0: The chemicals segment….
• 9:37
  Speaker 0: …the grainfield of our farmer – the start-of-the-verband loop– posted an operating loss of €三 hundred and seventy four million in twenty twenty five minus three point seven percent margin.
• 9:48
  Speaker 0: The operational reality contradicts the strategic narrative.
• 9:52
  Speaker 1: And which fields actually bring in something?
• 10:00
  Speaker 0: And those are the
• 10:08
  Speaker 1: ones being sold.
• 10:18
  Speaker 0: The best margin in the group, an IPO is being prepared.
• 10:22
  Speaker 0: The fields that produce are being sold.
• 10:24
  Speaker 0: What stays is the loop and its engine running at a
• 10:27
  Speaker 0: loss.".
• 10:28
  Speaker 1: But basic chemicals is a cyclical business.
• 10:31
  Speaker 1: Right now.
• 10:32
  Speaker 1: cheap energy in America And new competition from the Middle East Are pushing prices down.
• 10:37
  Speaker 1: Isn't this simply the trough?
• 10:39
  Speaker 0: In a trough especially... ...the loops cost advantage ought to show.
• 10:42
  Speaker 0: Five of six segments shrank in revenue in twenty-twenty five While global chemical production grew.
• 10:48
  Speaker 0: There's more than cycle at work here.
• 10:50
  Speaker 1: And the forecasts, how reliable are they?
• 10:53
  Speaker 0: Look at how BASF treated its own forecast for twenty-twenty five in February.
• 10:58
  Speaker 0: twenty-Twenty Five The group projected just over eight billion in EBITDA before special items.
• 11:05
  Speaker 0: In July the Group took that back to seven point five.
• 11:08
  Speaker 0: in October down again two seven.
• 11:10
  Speaker 0: In the end BAS F delivered six and a half below the third already lowered range.
• 11:16
  Speaker 0: Twenty percent below the starting point.
• 11:18
  Speaker 1: Cut twice and still missed
• 11:20
  Speaker 0: Though one has to add, One of two cuts was technical The coatings business stripped out.
• 11:26
  Speaker 0: The other was operational.
• 11:28
  Speaker 0: A planning process that starts That far from reality costs credibility.
• 11:32
  Speaker 0: And given that track record It's genuinely notable when guidance is raised instead of cut I'll say it explicitly.
• 11:39
  Speaker 1: And a target for twenty-twenty eight?
• 11:41
  Speaker 0: Nine to eleven billion From today's flat base.
• 11:44
  Speaker 0: Three and a half billion are missing in two years.
• 11:47
  Speaker 1: But guidance was just raised, isn't that exactly the turning point?
• 11:51
  Speaker 0: After two cuts in a single year The currency of trust has been spent more generously than was perhaps advisable.
• 11:58
  Speaker 0: A good quarter measured against an expectation That was cut twice is for now a step back onto a path you laid low yourself.
• 12:11
  Speaker 1: What makes value investors?
• 12:13
  Speaker 1: take a closer look at BASF, despite all
• 12:24
  Speaker 0: of this?
• 12:39
  Speaker 0: are covered.
• 12:42
  Speaker 0: The supervisory board more than ninety percent independent, thirteen risks named and quantified in euros, eleven insider transactions by Board members.
• 12:52
  Speaker 0: every single one a purchase not one sale... And the Board bonus actually bit on the return on capital.
• 12:59
  Speaker 0: zero-percent target achievement as I
• 13:01
  Speaker 0: said.".
• 13:01
  Speaker 1: That's an extensive positive list!
• 13:04
  Speaker 1: ...and it still is too?
• 13:05
  Speaker 0: Because earning power growth quality and capital allocation each sit at only two The second lowest score.
• 13:12
  Speaker 0: Financial resilience just about.
• 13:14
  Speaker 0: managers are three, four strong dimensions can't save a company when the engine underneath doesn't earn.
• 13:20
  Speaker 0: and When you look at the full picture A contradiction emerges?
• 13:23
  Speaker 0: A protected position on the outside... ...a core that loses money On the inside And a recurring pattern in how capital is handled.
• 13:30
  Speaker 0: The bottom line Two out of five Zone baseline Structural weaknesses One tier below my watch list.
• 13:39
  Speaker 1: The steps are real.
• 13:41
  Speaker 0: They are, and that belongs in the account!
• 13:58
  Speaker 0: Is
• 14:09
  Speaker 1: this too a cell signal?
• 14:10
  Speaker 1: I
• 14:11
  Speaker 0: wouldn't put it that way.
• 14:12
  Speaker 0: My score assesses the equity story, The Story A company tells about its own future and numbers have to carry.
• 14:19
  Speaker 0: It doesn't assess price.
• 14:21
  Speaker 0: An excellent business can be bad share if you pay much And mediocre one is worth while
• 14:28
  Speaker 1: what would happen for two
• 14:30
  Speaker 0: Upward.
• 14:31
  Speaker 0: Two or three years of return on capital above its own bar, distributions within what's earned investment back-above depreciation and a visible return from the transformation.
• 14:41
  Speaker 0: not just activity but result downward.
• 14:45
  Speaker 0: if basic chemicals continues to lie fallow in seed corn is still being handed out that the fields need.
• 14:50
  Speaker 1: What do I take away?
• 14:51
  Speaker 1: From this?
• 14:52
  Speaker 1: as an investor for the next set of accounts whichever company it is
• 14:56
  Speaker 0: Three rules first Always measure return on capital against the bar.
• 15:01
  Speaker 0: The company sets itself not Against zero.
• 15:04
  Speaker 0: second if more is distributed than earned ask where the difference comes from.
• 15:09
  Speaker 0: and third when profit jumps Ask what was sold?
• 15:13
  Speaker 1: And mine though.
• 15:14
  Speaker 1: louder a single quarter Is celebrated the more closely the years before it are worth looking at,
• 15:20
  Speaker 0: and with that the underlying pattern and It genuinely extends beyond BASF.
• 15:25
  Speaker 0: When a company distributes more then it earns fills the gap with debt and disposals, And the centerpiece of its own story doesn't generate a profit.
• 15:33
  Speaker 0: It's consuming it substance.
• 15:36
  Speaker 0: At BASF that looks like this The return on capital has sat below Its own cost for three years.
• 15:42
  Speaker 0: The Gap to shareholders is filled With Debt & Disposals.
• 15:46
  Speaker 0: Guidance was cut twice and still missed.
• 15:57
  Speaker 0: Together they describe a distribution policy that consumes the substance of the company to keep a dividend story alive, That the operating business no longer supports.
• 16:06
  Speaker 0: The farmer is eating his seed corn
• 16:08
  Speaker 1: And a record quarter from a sale doesn't change that.
• 16:12
  Speaker 0: Perhaps it's the beginning of better harvest.
• 16:14
  Speaker 0: What decides isn't one-quarter But whether fields yield again what they cost.
• 16:20
  Speaker 0: For the moment... ...the business earns less than its capital costs and more is distributed then their own.
• 16:47
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• 16:55
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• 17:02
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• 17:09
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