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

(II) BASF Group: Steady core-business growth + one-time gains from asset divestitures BASF’s Q2 2026 sales totaled €17.2 billion, an increase of €2.4 billion (+16.4% year-on-year); price increases contributed +11.5%, volume growth contributed +7.3%, while foreign exchange had only a minor negative impact on the preliminary business report. EBITDA excluding special items stood at €2.4 billion, up €854 million year-on-year; profitability improved significantly across its three core segments—Materials, Chemicals, and Industrial Solutions. The extraordinary leap in profits stemmed primarily from a one-time asset disposal: the sale of its Coatings business to Carlyle Group generated a post-tax gain of €3.5 billion, driving quarterly net income to €4.2 billion and net profit to €4.1 billion—compared to just €79 million in the same period last year. Excluding this transaction, Q2 EBIT was €937 million (versus €293 million a year earlier), and EBITDA excluding special items was €2.4 billion. Cash flow shows structural pressure: operating cash flow amounted to €524 million—a €1.1 billion decline year-on-year—mainly due to higher raw material prices inflating inventory and accounts receivable; investing cash flow swung sharply positive by €5.5 billion, entirely attributable to proceeds from the coatings business sale; free cash flow turned negative at €189 million, highlighting mounting working-capital pressure. Three Shared Underlying Drivers Behind Both Giants’ Performance Surge 1. Middle East geopolitical tensions reshaping global feedstock supply, boosting integrated gross margins via price hikes According to industry analysis, heightened Middle East geopolitical tensions—and anticipated restrictions on traffic through the Strait of Hormuz—combined with tightening global polyolefin supply, constitute key external catalysts for the current round of price increases. Disruptions to Strait transit directly hindered exports of naphtha and polyethylene from the Middle East, causing feedstock shortages and reduced operating rates at cracker facilities across Asia and Europe. This tightened global supply of polyolefins and general-purpose chemicals, pushing spot prices sharply upward. Dow leveraged its low-cost ethane-based integrated capacity in North America—unaffected by geopolitical disruptions—and raised polyethylene prices twice, directly widening product spreads. Although BASF’s European plants faced energy-cost headwinds, its Chemicals and Materials segments successfully passed rising costs downstream, aligning with the global pricing cycle; price increases thus became the primary driver of revenue growth for both firms. Meanwhile, Brent crude oil averaged $96.7/barrel in Q2 2026—significantly higher than prior periods—prompting broad-based price hikes across chemical products and systemic margin recovery across the global value chain. This dynamic mirrors the explosive Q2 performance of Chinese refining & petrochemical leaders such as Rongsheng Petrochemical and Orient Henghui, confirming a clear industry-wide earnings recovery trend evident in disclosed earnings and domestic private-sector refining forecasts. 2. Global ‘cost reduction + capacity rationalization’ underway—proactive divestment of high-cost assets Both companies have moved beyond passively enduring cyclical losses into active restructuring and streamlining—with highly aligned strategic actions: a) Large-scale workforce reductions. Dow launched a global layoff plan targeting 4,500 employees; 55% of the cuts were implemented in Q2, including outsourcing reductions and automation-driven labor substitution. BASF reduced its global headcount by 7,000 between 2024 and end-June 2026; full-time staff at its Ludwigshafen site fell below 30,000—the lowest level since 1954—continuously compressing fixed costs.

Dow Chemical’s Q3 2025 Financial Report (October 27, 2025)

Stock price had languished for a full year—plummeting two tiers lower; yet surged 13% following the Q3 2025 earnings release. Are there any fundamental changes? ・ First, revenue came in weak: the Q2 guidance for this quarter was $10.2 billion. ・ Second, GAAP EPS turned positive solely due to two non-recurring items; operating profit failed to cover interest expenses. ・ On the positive side, the loss was narrower than expected—evidence that cost-cutting and capital expenditure reductions are delivering results. Has the chemical industry reached a downturn inflection point? ・ On the supply side, Dow believes capacity discipline is now emerging globally—including in China: “We’ve seen speculation about closures totaling approximately 13 million metric tons—comprising roughly 5 million tons from additional capacity in Asia, Japan, and Korea, and around 7 million tons from China’s [anti-evolution] policies.” ・ On the demand side, Dow views overall conditions as still weak—with no improvement versus last quarter. It hopes interest-rate cuts will stimulate construction starts.

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