Daily Brief: Europe’s Go-To Chemicals Company Is Feeling The Corrosive Effect Of Rising Costs

Daily Brief: Europe’s Go-To Chemicals Company Is Feeling The Corrosive Effect Of Rising Costs

almost 2 years ago3 mins

Mentioned in story

BASF reported mixed results on Friday, and investors scrambled to wash their hands of the German chemicals company’s toxic stock.

What does this mean?

BASF’s products are essential to just about every industry out there: electronics, cars, construction, agriculture – you name it. That means its customers’ hands were tied when the company upped its prices, which helped push its revenue 24% higher last quarter than the same time last year. Trouble was, BASF’s costs climbed too – by nearly $1 billion, on the back of spiking energy prices in Europe alone. That goes some way to explain why its profit only grew a weaker-than-expected 10% last quarter. It probably won’t pick up its feet anytime soon, either: BASF said it’s anticipating its profit to be lower this year than last, as economic growth languishes after a bumper 2021. Investors didn’t like that one bit: they sent its shares down 4%.

BASF stock
Source: Google Finance

Why should I care?

For you personally: This always comes back on you.

Those energy bills aren’t likely to come down anytime soon, not after the Russian invasion of Ukraine sent natural gas and power prices in Europe surging. That’s got BASF – one of Europe’s biggest corporate users of energy – planning some hefty price hikes to offset those rising costs. But not only do you not have that option, BASF’s hikes will make everything from plastics to electronics more expensive, meaning you might feel the pinch there too.

Natural gas prices

The bigger picture: Ooh la la.

Those higher prices will give inflation in Europe another nudge, which is the last thing it needs after data out last week showed consumer prices in France – the region’s second-biggest economy – rose 4.1% in February compared to a year ago. That’s a big jump from January’s 3.3%, and the highest inflation rate the country’s seen since records began.

French inflation

Keep reading for our next story...

Beyond Meat Reported Worse-Than-Expected Results

Beyond Meat image

Beyond Meat reported worse-than-expected results late last week, even as the plant-based brand desperately tries to convince foodies that it tastes just as good as the real thing.

What does this mean?

Beyond Meat makes more than half of its revenue from selling its beef-free burgers, pork-free sausages, and chicken-free chicken at US stores. But weak demand, higher discounts, and more competition from other plant-based brands all conspired to push the company’s US retail sales revenue down 20% last quarter from the same time in 2020. So it didn’t matter that it sold more internationally and to American restaurants: Beyond Meat’s overall revenue shrank by 1% last quarter. Worse still, supply chain hiccups and higher material and manufacturing costs caused the company’s losses to triple last quarter. Investors couldn’t stomach another bite: they sent its stock down more than 10%.

Beyond Meat stock

Why should I care?

The bigger picture: Is Beyond Meat a flash in the plant?

Beyond Meat’s outlook for 2022 missed expectations too, which is indicative of a wider issue: the growth of the plant-based meat market is slowing down fast. In fact, US sales of plant-based meat – which grew 46% in 2020 – fell 0.5% last year, according to data provider SPINS. Maple Leaf Foods has a theory as to why: the owner of plant-based brand Lightlife thinks consumers might not actually like the taste of meat alternatives, and their lofty prices certainly don’t help them go down any easier.

Plant based meat demand

Zooming out: Quick, someone get the quinoa.

There’s another – arguably more pressing – food problem in the world right now: Russia and Ukraine account for more than a quarter of the global trade in wheat between them, as well as a fifth of corn sales. The recent conflict between the two countries, then, could threaten supplies of the grains, pushing up their costs and leading to a spike in already record-breaking global food prices.

Wheat prices
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG