BASF op profits up 26% to Euro2.9bn in '02 on cost cuts

18 March 2003 12:32  [Source: ICIS news]

LONDON (CNI)--Reduced costs, higher petrochemical sales and growth in North American and Asian markets helped BASF boost operating profits before exceptional items last year by 26% to Euro2.90bn ($3.1bn) on flat sales of Euro32.2bn.

 

After taking into account the Euro6.12bn of extraordinary income in 2001, however, pre-tax profits last year were down 61% to Euro2.64bn and net earnings tumbled 74% to Euro1.50bn.

 

In announcing its 2002 financial results on Tuesday, BASF underlined the role played by restructuring and said it was on target to achieve its goal of reducing costs by around Euro1bn by the end of this year.

 

BASF said it got off to a good start to 2003, with first quarter sales expected to be higher than the corresponding period last year and ‘significantly higher’ pre-exceptional earnings before interest and taxes (EBIT).

 

In the second quarter, however, BASF cautioned that sales would only be in line with Q2 last year, while earnings growth would decrease.

 

The marked improvement in pre-exceptional EBIT last year reflected a tripling in profits from plastics and fibres plus very substantial rises in earnings from chemicals and performance products. These sectors outweighed a major slump in profits from agricultural products and nutrition plus weaker earnings from the oil and gas business.

 

Higher capacity utilisation plus lower costs enabled the chemicals segment to overcome rising raw material prices to raise EBIT by 59% to Euro676m on sales 18% ahead at Euro5.32bn. BASF explained that petrochemical sales were boosted by additional volumes from the new steam cracker at Port Arthur, Texas.

 

The plastics and fibres business also benefited from increased output, improved demand and lower costs to register a 229% rise in profits to Euro593m on sales up 7.4% at Euro8.48bn.

 

Performance products earnings were up 64.5% to Euro653m despite a 1.7% decline to Euro8.01bn in sales. BASF said increased volumes were unable to compensate for continuing pressure on prices and negative currency effects.

 

Profits from the agricultural production and nutrition business, however, fell 21% to Euro217m on sales down 15.5% to Euro4.92bn. BASF blamed a combination of bad weather in the American Midwest, difficult economic conditions in South America, excessive stockpiling in the wake of industry consolidation plus a contraction in the market for selective herbicides.

 

In the fourth quarter, however, BASF said cost cuts enabled its agrochemicals and nutrition division to enjoy substantially higher earnings despite a 26% drop in sales. BASF said it plans to continue the programme of cost cuts and has initiated measures aimed at reduction of a further Euro100m.

 

Profits from oil and gas operations last year were down 7.5% to Euro1.21bn on sales 7.0% lower at Euro4.20bn. BASF said increased volumes could not offset the effects of the weaker dollar.

 

BASF’s strong group performance last year reflected improved performances by its operations in North America and Asia-Pacific. Higher petrochemical sales helped raise North American EBIT before special items by over Euro320m to Euro74m. Sales were up 2% to Euro7.8bn.

 

Profits from the Asia-Pacific and Africa regions rose significantly to Euro207m last year, driven mainly by chemicals, plastics and performance products. Sales in the two regions were up 8% to Euro5.10bn.

By: Neil Sinclair
+44 20 8652 3214

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