The world’s largest chemical company BASF just warned its investors that it expects to book a €600 million impairment on its books because of cripplingly low oil prices.
The German chemical giant said in its preliminary 2015 statement that “prices for oil and gas will remain at a low level in 2016. The assumptions for oil and gas prices have also been reduced for subsequent years.”
“This results in impairments of around €600 million in the Oil & Gas segment. This amount, which does not affect cash flow, is reported as a special item and reduces EBIT in the Oil & Gas segment in the fourth quarter of 2015,” it added.
BASF said in the statement that sales also fell by 5% to €70.4 billion. But investors will not know the full extent of the pain until BASF publishes its full year results on February 26.
BASF is the latest in a long line of companies that have taken a hit over falling oil and commodities prices. Oil prices are down from the triple digit figures from June 2014 and are now hovering around $30 per barrel — down 70%.
It is hurting any company that uses oil within its supply chain including BASF. Its shares are down over 18% during the past year.