BASF Gives Profit Warning on Impairments Related to Nord Stream

Narrow-moat BASF released certain quarterly numbers and announced a EUR 500 million cost-saving program. The profit warning affects net income, as it is due to noncash impairments on the company's shareholding in Wintershall Dea in the amount of EUR 740 million. This is due to a partial write-down of Wintershall’s participation in the company that operates the Nord Stream 1 pipeline. BASF’s sales (EUR 21.9 billion) and EBIT (EUR 1.3 billion) were actually quite close to the Vara consensus, so we don’t expect a big market reaction. Indeed, the shares were up 2% intraday. We also don’t expect to make any material changes to our forecast or EUR 62/$16 fair value estimate. At current levels, the shares look undervalued.