Surging 51-fold! BASF and Dow’s Q2 financial reports stage a dramatic turnaround—among global chemical companies pursuing ‘slimming down and upgrading quality,’ who are the top performers?

Dow’s Q2 net profit of $802 million excludes non-recurring gains such as asset disposals and government subsidies, deriving entirely from expanded polyethylene price spreads and internal cost reductions—reflecting genuine improvement in core operational capabilities, with earnings exhibiting sustainability. In contrast, BASF’s €4.1 billion net income includes €3.5 billion from the sale of its coatings business; excluding this one-off gain, core operating profit stands at only ~€600 million, masking underlying pressure on operating cash flow. 2. Divergent Cash Flow Performance: Dow’s Smooth Cash Inflow vs. BASF’s Strained Operating Cash Flow Dow generated $1.324 billion in operating cash flow in Q2—a sharp year-on-year improvement to positive territory—whereby price-driven gross margin gains directly translated into operating cash, supported by healthy inventory turnover. BASF’s operating cash flow plummeted by €1.1 billion year-on-year, primarily due to rising raw material costs: inventory tied up an additional €654 million, while accounts receivable absorbed €843 million more than last year—evidencing upstream cost pressures and extended downstream payment terms, significantly weakening its operational cash-generating capacity. BASF relied solely on the €5.6 billion net cash inflow from the coatings divestiture to improve investment-side metrics; its free cash flow turned negative, highlighting markedly higher working capital pressure compared to Dow. This reflects a broader pain point among European chemical firms: rigidly high energy and raw material costs, coupled with lower capital turnover efficiency versus North American ethane-based producers. 3. Regional Cost-Base Disparity: North American Ethane Route Dominates European Naphtha Route The fundamental gap lies in feedstock cost structure: Dow concentrates core capacity in North America, benefiting from abundant, low-cost ethane—geopolitical tensions in the Middle East have further amplified this cost advantage, while naphtha crackers face rising input costs and ethane-based producers enjoy sustained margin expansion. BASF anchors its core operations in Europe, enduring persistent triple pressure—high electricity prices, high carbon taxes, and expensive naphtha—meaning even product price hikes yield weaker margin recovery than their North American peers. This regional cost gap directly shapes long-term industry structure: Global chemical investment through 2026 continues shifting toward integrated refining-and-chemical hubs in North America, Southeast Asia, and China, while European domestic capacity steadily exits—making industrial relocation irreversible. Three Clear Trends for the Global Plastics & Chemicals Industry in 2026 Trend One: Cyclical Recovery Is Structural, Not Broad-Based Demand Revival—Geopolitical Gains Are Short-Term Whether Dow, BASF, or domestic private-sector refiners, the core driver behind this round of soaring profits is supply contraction-induced price hikes—not an explosion in end-demand. Dow’s overall Q2 sales volume declined 1% year-on-year, with packaging plastics down 4%; BASF saw only partial segment volume growth, while surface treatment technologies posted slight volume declines. As navigation through the Strait of Hormuz gradually normalizes, polyethylene prices in the Americas fell in June. Dow’s management warned that Q3 profitability will moderate due to planned plant maintenance and seasonal demand softness. The excess-profit window created by geopolitical conflict is inherently limited; medium- to long-term industry profitability will revert to fundamentals of supply and demand—with the pace of recovery in downstream consumption, real estate, and packaging sectors determining the industry’s long-term ceiling. Trend Two: Global Chemical Industry Enters the ‘Asset Restructuring Era’—Divestitures, Shutdowns, and Layoffs Become Routine Historically, firms weathered cyclical troughs by cutting production loads and scheduling maintenance. In 2026, however, global giants uniformly pivot toward permanent asset optimization: divesting low-margin businesses, shuttering aging facilities, implementing large-scale layoffs, and slashing capital expenditures.

Early 2020 full-year performance preview: How did BASF, Dow, SABIC, and other chemical giants fare?

Approaching the Spring Festival, chemical enterprises both domestically and internationally have successively released their Q4 2020 financial reports and preliminary full-year 2020 performance forecasts. Notably, traditional foreign chemical giants—including Dow and BASF—are expected to post declining results, whereas domestic chemical leaders such as Wanhua Chemical delivered a strong reversal in Q4, with market capitalization briefly exceeding RMB 340 billion! Xiao U has compiled selected 2020 performance data for domestic and international chemical enterprises below: BASF recently published preliminary Q4 and full-year 2020 financial data. Q4 2020: • Sales forecast: €15.905 billion (Q4 2019: €14.686 billion), exceeding both prior-year figures and analyst consensus; • EBIT before special items forecast: €1.113 billion (Q4 2019: €842 million), above both prior-year and analyst expectations; • EBIT forecast: €932 million (Q4 2019: €579 million), surpassing both prior-year and analyst consensus. Q4 sales rose 8%, driven by higher volumes and prices, partially offset by adverse currency effects. Full-Year 2020: • Sales forecast: €59.149 billion (2019: €59.316 billion), slightly below the prior year but above both analyst consensus and BASF’s own forecast; • EBIT before special items forecast: €3.56 billion (2019: €4.643 billion), down year-on-year yet above analyst consensus and BASF’s forecast; • EBIT forecast: -€191 million (2019: €4.201 billion), sharply lower year-on-year but still above analyst consensus. Dow Chemical (DOW.US) released its Q4 2020 financial report. Q4 net sales totaled $10.706 billion (~RMB 69.2 billion), up 5% year-on-year; net income reached $1.254 billion (~RMB 8.1 billion), reversing a $2.31 billion loss (~RMB 14.9 billion) in Q4 2019. Dow Chemical Q4 Financial Highlights: • Equity income: $106 million, up $127 million year-on-year, primarily driven by continued improvement in Sadara’s financial performance. • GAAP net income: $1.3 billion. Operating EBIT: $1.1 billion, up $1.0 billion year-on-year, fueled by improved margins in polyethylene and polyurethane applications. • Cash from operations (continuing operations): $1.7 billion; free cash flow: $1.4 billion. Despite higher sales, working capital contributed $236 million in cash. Full-year free cash flow totaled $5.0 billion—up $1.2 billion year-on-year. Q4 cash conversion ratio stood at 93%; full-year ratio was 112%, up 30 percentage points year-on-year. • Local prices rose 2% year-on-year, mainly driven by increases in polyethylene and polyurethane applications. Currency effects added 2% to sales. Prices rose 8% quarter-on-quarter across all business segments. According to statistics, Dow Chemical’s full-year 2020 net sales amounted to $38.542 billion (~RMB 249.1 billion), down 10% from $42.951 billion in 2019.

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