One of BASF’s big profit generators, its oil and gas exploration unit Wintershall, turned into a drag on earnings Wednesday.
BASF, the world’s largest chemicals firm based in Ludwigshafen, said in a statement that the strong decline in global oil and gas prices over the past few months led to a non-cash writedown of €600 million, or $652 million, of its oil and gas operations in the fourth quarter.
As a result of the writedown, the company was forced to issue a profit warning. It expects an 18-percent drop in its 2015 operating profit before interest and taxes to €6.2 billion from €7.6 billion the year before. Wintershall in 2013 and 2014 contributed 34 percent and 22 percent, respectively, to BASF’s operating profit.
The profit warning makes BASF the latest casualty of plunging global oil prices. While some companies have benefited, others are seeing profits evaporate as oil prices have continued to spiral downwards over the last few months amid a glut of global supply.
BASF shares dropped as much as 4.6 percent to €59.20 in Frankfurt when markets opened Wednesday. By 11:18 local time, the stock was down 3.4 percent at €60.00.