UPDATE 1-BASF says basic chemicals accounted for most of the slump in Q2

German chemicals giant BASF, which surprised investors with a profit warning earlier this month, on Thursday said a slump at its basic petrochemicals businesses accounted for most of the weakness in the second quarter. "Earnings in the second quarter of 2019 were significantly negatively impacted by the lower volumes and margins in the Chemicals and Materials segments," BASF said in a statement, adding that the two divisions accounted for 83% of the overall earnings decline in the second quarter.

In a surprise announcement on July 8, BASF forecast a 30% fall in 2019 operating profit instead of a rise as previously predicted, weighing heavily on the share price. It also published preliminary group results for the second quarter at the time, with adjusted group operating income almost halving.

"The global economic risks have increased significantly during recent months," Chief Executive Martin Brudermueller said in the statement. "This has been driven by geopolitical developments and the ongoing trade conflicts between the United States and its trading partners. These conflicts will not be resolved in the near future and are causing a noticeable slowdown in macroeconomic growth around the world, particularly in China."

BASF slashed its 2019 growth expectations for global industrial production and for global chemical production to 1.5% from a previous forecast of 2.7%. Still, BASF stood by its dividend policy of aiming to increase the payout to shareholders every year. BASF is shedding construction chemicals and pigments businesses, is carving out its oil and gas business, and in June unveiled plans to cut 6,000 jobs as Brudermueller seeks to stem the earnings decline.

Also Read: BASF says basic chemicals accounted for most of the slump in Q2