BP Q4 chemical profits plunge 65% to $125m

17 February 1999 14:30  [Source: ICIS news]

LONDON (CNI)--BP Amoco unveiled on Wednesday a huge slump in fourth quarter profits for its chemicals business and warned that downward pressure on margins and volumes is expected to continue for some time.

Falling product prices and lower margins resulting from additional industry capacity and weakening demand were blamed for a 65% drop to $125m (Euro111m) in Q4 replacement cost operating profits, after adjusting for special charges. BP Amoco added that planned plant turnarounds also had an adverse impact through lost production volumes and higher costs.

The sharp deterioration in Q4 profitability was reflected in full year profits which fell $430m or 28% to $1.10bn despite a 3% rise to 20.07m tonne in chemicals production. BP Amoco said the volume improvement reflected the acquisition of Styrenix in Q1 1998, offset towards the end of the year by the impact of a heavy shutdown programme.

The heavy pressure on margins and volumes has been caused, said BP Amoco, by a combination of new industry capacity coming onstream at the same time as demand is weakening, especially in Asia.

Lower chemicals profits contributed to the sharp slide in BP Amoco group operating earnings in Q4 which fell to $875m from $1.38bn, after adjusting for special charges. Full year group profits were down 50% at $4.47bn, which was at the top end of analysts' predictions.

The plunge in crude oil prices was blamed for a 57% drop to $747m in Q4 exploration and production operating profits, after adjusting for special charges of $327m. Full year profits were down 50% to $3.63bn.

Refining and marketing, however, managed to increase Q4 operating profits by 20% to $506m and boosted full year results by 12% to $2.56bn.

BP Amoco said it expected to achieve the $2bn/year of merger cost savings within the next 12 months - a year ahead of schedule. However, it also announced a further 3000 redundancies this year on top of the 7000 already announced. Chief executive John Browne said the company would take a restructuring charge of $1.5bn in 1999, mainly to cover severance and associated costs from these redundancies.

A spokesman for BP Amoco told CNI that it was not yet known exactly where the additional 3000 job losses would fall. It is thought likely, however, that most will be in the oil and gas business, with the majority in the US.

By: Neil Sinclair
+44 20 8652 3214

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