Fitch Ratings revised the outlook on BASF SE's long-term issuer default rating to negative from stable, citing the company's weakening profitability and cash flow generation since the second half of 2018.
The revision reflects the 19% annual fall in BASF's first-half recurring EBITDA to €4.6 billion as a result of softer demand, supply-driven pricing pressure in the chemicals and materials divisions and turnaround of cracker plants, Fitch said. The rating agency added that the company's credit metrics no longer align with its A+ rating, with the funds from operations-adjusted net leverage ratio expected to remain above 2x in 2019-2022.
Fitch said the revision does not take into consideration the potential benefit of both BASF subsidiary Wintershall Dea GmbH's planned IPO and the group's restructuring program, including the sale of its construction chemical and pigment businesses.
The rating agency also expects that BASF's acquisition of Solvay SA's polymide business would increase the chemical company's exposure to Asian and South American markets.
Fitch affirmed BASF's long- and short-term issuer default ratings at A+/F1.
