14 March 2002 11:35 [Source: ICIS news]
LONDON (CNI)--BASF said Thursday that a strong downturn in its chemicals and, in particular, its plastics and fibres businesses led to a 33% drop in operating profits before special items to Euro2.29bn ($2.0bn) last year.
Sales from ongoing businesses rose over 3% to almost Euro32bn but the German group warned that it did not expect any increase this year.
"In 2002, our goal is to generate significantly higher earnings than in the previous year from roughly the same level of sales from ongoing businesses," it stated. Total sales fell 10% to Euro32.50bn last year.
Pre-tax profits before minority interests more than doubled to Euro6.73bn from Euro2.83bn, inflated by extraordinary income from the sale of the pharmaceutical business. BASF said the extraordinary income, which amounted to over Euro6bn, offset special charges.
The group said its 2001 results include net special charges of over Euro1bn, including Euro747m of restructuring costs. Operating profits after special items plunged 60% to Euro1.22bn.
The restructuring measures, together with synergies in the agricultural products business and a streamlining of the group's global organisation, are expected to reduce costs by Euro1bn by 2003, BASF said. Cost savings last year were Euro250m, and are estimated at about Euro670m this year.
Chairman Jurgen Strube said restructuring measures, efficiency improvements, synergies in the agricultural products division and an expected economic recovery would be the main factors behind its targeted increase in operating profits this year. "We hope that demand for products from the chemical industry will increase in the second half of the year. And we will use the time until the upturn to further improve our efficiency."
Current forecasts for the timing of a recovery vary greatly, he said. "Early indicators increasingly give grounds for guarded optimism. However, in the first months of 2002 we have not yet seen signs of a strong recovery in our order books."
In the fourth quarter of last year, group operating profits before special items sank 70% to Euro252m on sales down 17% at Euro7.68bn. However, after special items BASF made a Q4 loss of Euro190m against a Euro746m gain.
BASF's chemicals division was hit last year by high raw materials costs, reduced demand and start-up costs associated with production facilities in Kuantan in Malaysia and Port Arthur in Texas. Operating profits before special items sank 34% to Euro425m on flat sales of Euro4.49bn. Including special items, profits were 43% lower at Euro362m.
The plastics and fibres division suffered a 77% drop in operating profits to Euro180m on falling demand and lower prices. Sales plunged 26% to Euro8.19bn. BASF said the fibres, fibre intermediates and styrenics businesses were particularly badly hit, while the polyurethanes (PU) business performed better. After special items, the division made a Euro2m loss against a Euro586m profit last time.
Profits from performance products decreased 36% to Euro397m (down 83% to Euro99m after special items) on sales down 3% to Euro8.15bn. The division was hit by the economic slowdown in North America and Europe, the group explained.
The agricultural products and nutrition division achieved a 10% profits increase, before special items, to Euro274m. However, after special items it suffered a Euro162m loss against a Euro205m loss last time. BASF said the fine chemicals business performed successfully while the agricultural products business "remains on course". Sales from the division were 13% lower at Euro5.83bn.
Profits from the oil and gas division rose 3% to Euro1.31bn (flat at Euro1.31bn after special items) on sales up 14% at Euro4.52bn.
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