BASF downgraded at Bank of America on China investment risks

[View of BASF in Ludwigshafen, Germany]
U. J. Alexander/iStock Editorial via Getty Images

Bank of America has cut its rating on BASF (OTCQX:BASFY [https://seekingalpha.com/symbol/BASFY]) (OTCQX:BFFAF [https://seekingalpha.com/symbol/BFFAF]) to Underperform from Neutral, warning that the company’s €10 billion investment in a new China complex is straining finances and putting its dividend at risk.

Analyst Matthew Yates in a note to clients questioned whether the plant would generate meaningful profits in the near term given weak market conditions.

He also cautioned that shifting trade flows could undermine BASF’s (OTCQX:BASFY [https://seekingalpha.com/symbol/BASFY]) (OTCQX:BFFAF [https://seekingalpha.com/symbol/BFFAF]) European operations, raising the possibility of additional restructuring, something the company may be unwilling or unable to pursue.

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