BASF hit by lower earnings but sees end to misery

17 November 2003 00:00  [Source: ICB]

BASF's full-year 2003 earnings before special items will be below those of 2002, chairman Jürgen Hambrecht warned at the company's third quarter results presentation. But, he noted, latest figures for ongoing businesses 'give grounds for hope that we have reached the bottom of the downturn'.

Sales in Q3 advanced 2% over the same period last year, to €7.74bn, but earnings before interest and tax (Ebit) fell 20% to €374m. Net income for the quarter was €120m, down 51%.

Hambrecht commented that the business environment was characterised by high raw materials prices, margin pressure and the weakness of the US dollar. Although sales volumes were up 4.5% and prices 2.1%, currency effects had a 5.5% negative effect on group sales.

Hambrecht said that BASF is continuing its cost-cutting and efficiency programmes in North America and Europe. Through a two-phase restructuring in North America, it hopes to save $250m/year by 2006.

The first phase, addressing service units, is under way and will this year achieve cost savings of $100m; BASF is taking one-time costs of $55m as a result. Around 1000 jobs will go and BASF will move to a smaller HQ in New Jersey.

The second phase will concentrate on optimising the North American product portfolio and site structures. Fixed costs will be cut by $150m by 2006, says Hambrecht.

In Europe, BASF will institute a second wave of restructuring to consolidate further its business centres across the region. The Europe II programme should be complete by the end of 2005.

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