Analysis: Plastics, fibres lead BASF's Q2 earnings growth

08 August 2002 14:11  [Source: ICIS news]

LONDON (CNI)--The plastics and fibres segment was the star performer in BASF’s second quarter results, with underlying earnings before interest and tax (EBIT) tripling to Euro211m ($208m) from Euro70m.

The segment benefited from high capacity utilisation rates, strong demand and cost cuts resulting from restructuring measures. Plastics and fibres sales climbed 3.9% to Euro2.24bn.

The German group posted on Thursday a 9.5% hike in group EBIT before special items to Euro822m for the three month period, boosted by the chemicals, plastics and fibres and performance products segments. The remaining segments – agricultural products and nutrition and oil and gas – suffered substantial earnings declines.

Group sales were stable at Euro8.38bn against Euro8.33bn, with sales in Europe down 1% at Euro4.43bn and sales in the Nafta (North American Free Trade Agreement) region up 6% at Euro2.25bn. South American sales slumped 26% to Euro405m.

BASF’s underlying EBIT were 7% ahead of consensus estimates, according to Credit Suisse First Boston (CSFB). At approximately 14:30 hours local time (12:30 GMT), shares in BASF were trading 5.16% higher at Euro41.17.

In its review of its plastics and fibres segment, BASF said the styrenics business achieved a 5% rise in second quarter sales to Euro888m. Styrenics’ operating profits also improved, although actual numbers were not disclosed. BASF attributed the improvement to price increases, reflecting severe hikes in raw material costs.

Sales of performance polymers climbed 2.6% to Euro628m and profits were boosted as a result of restructuring measures and good capacity utilisation.

Polyurethane sales rose 3.7% to Euro727m, lifted by increased volumes of basic materials in Asia and the Nafta region. Earnings also increased thanks to higher utilisation rates.

The chemicals segment enjoyed a 33% hike in second quarter underlying EBIT to Euro161m on sales up 20% at Euro1.40bn. BASF said the start-up of the new Port Arthur cracker in Texas, US at the end of last year contributed to a large increase in volumes.

Sales in the inorganic chemicals business slipped 2% to Euro182m although earnings improved, said BASF.

The petrochemicals business achieved a 46% increase in second quarter sales to Euro766m, aided by improved margins. Earnings also increased.

In the intermediates business, sales were flat at Euro450m against Euro452m and earnings declined due to increases in the costs of some raw materials.

BASF said earnings from its agricultural products and nutrition segment fell 21% to Euro130m on sales down 2% at Euro1.50bn. The agricultural products business suffered a 19% drop in earnings to Euro108m, mainly due to the negative impact of unfavourable weather conditions in the US on the herbicide activities. BASF said the business was also hit by the weak situation in South America. Sales of agricultural products fell 3.4% to Euro1.00bn.

In the fine chemicals business, second quarter EBIT slumped 31% to Euro22m although sales grew 1.4% to Euro492m. BASF said the slight increase in demand continued.

The oil and gas segment registered a 23% drop in earnings to Euro292m on sales down 10% at Euro879m. Sales fell mainly because of lower crude oil prices and the weakening of the dollar against the euro, said BASF. Earnings from the oil business declined while earnings from the natural gas business improved.

By: Anna Jagger
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