BASF's divisions raise Q2 pft on capacity usage, cost cuts

04 August 2004 12:51  [Source: ICIS news]

LONDON (CNI)--Improved capacity utilisation and fixed cost reductions have contributed to higher second quarter operating income before special items in all five divisions, German group BASF said on Wednesday.

 

Chemicals

 

For the three months ended 30 June 2004, operating income in the chemicals division more than doubled to Euro333m from Euro134m, thanks to improved capacity utilisation, prices hikes and fixed cost reduction. After including special items, income was Euro328m compared with Euro127m in Q2 last year.

 

Sales were up 22% (volumes 15%, portfolio 5%, prices 5% and currencies minus 3%) at Euro1.75bn, rising in all businesses.

 

In the inorganics business, Q2 sales grew 15% to Euro211m. Volumes were up in all product lines, resulting in higher earnings in most of the portfolio. Exact earnings were not disclosed at business unit level. BASF said the acquired boron and potassium specialties business, which is now fully integrated, made a contribution to sales growth.

 

In the petrochemicals business, earnings improved as BASF was able to pass higher feedstock costs onto customers through product price hikes in tight markets. Sales grew 30% to Euro1.05bn as volumes increased for olefins, solvents and plasticisers as well as alkylene oxides and glycols. Capacity utilisation of steam crackers and other major plants was high, said BASF.

 

Earnings in the intermediates business rose despite higher feedstock costs, due to price hikes and fixed cost reduction. Sales increased 11% to Euro490m. Turnover in European amines and Asian butanediol (BDO) and derivatives as well as polyalcohols and specialties rose.

 

Plastics

 

In the plastics division, Q2 operating profits before special items more than doubled to Euro172m from Euro76m. Earnings after inclusion of special items rose 16% to Euro163m. The division benefited from fixed cost reduction and improved capacity utilisation. Revenues grew 16% (volumes 14%, portfolio 2%, prices 3% and currencies minus 3%) to Euro2.52bn.

 

A reduction in fixed costs enabled the styrenics business to record higher earnings, on sales up 14% at Euro1.02bn due to higher prices and strong product demand. At the same time, BASF said the hike in raw material costs, particularly benzene, had put margins under pressure.

 

The performance polymers business improved earnings due to higher volumes and a significant reduction in fixed costs. Sales grew 18% to Euro649m. Volumes rose significantly worldwide, in particular for engineering plastics for the automotive and electronics sectors. Margins for engineering plastics remained under pressure but BASF said it was able to pass on higher feedstock costs for fibre intermediates to the market. New product Ultradur High Speed was well received by the market, the firm added.

 

The polyurethane (PU) business continued to suffer pressure on margins because of higher raw material prices, in particular for benzene, styrene, toluene and propylene. Sales grew 16% to Euro854m, as revenues and volumes were up in almost all product lines worldwide. BASF said it was able increasingly to raise selling prices during the quarter. Recent US acquisition Foam Enterprises has now been successfully integrated, added BASF.

 

Performance products

 

Earnings in the performance products division rose 50% in Q2 to Euro217m before special items and 57% to Euro214m after special items. Turnover improved 6% to Euro2.03bn, with higher volumes in all businesses.

In the performance chemicals business, Q2 earnings improved due mainly to contribution from the detergents and formulators area. Fixed cost reductions more than offset negative currency effects and persistent margin pressures, said BASF. Sales were up 4% at Euro825m, rising in all product lines except those relating to textiles.

 

The coatings business raised profits on fixed cost reduction, despite the pressure on selling prices. Turnover was up 3% at Euro520m as volumes rose, in particular for automotive coatings and decorative paints. BASF said the restructuring of industrial coatings activities helped to cut costs and new production capacities are strengthening its position in coil coatings in the growing Chinese market.

 

In the functional polymers business, operating income almost doubled due to higher sales volumes, price hikes and fixed cost reductions. The global demand upturn in key customer markets led to a 11% hike to Euro684m in sales, in particular for monomers and dispersions for decorative paints.

 

Agricultural products and nutrition

 

Profits in the agricultural products & nutrition division grew 15% in Q2 to Euro241m. Including special items, earnings improved 30% to Euro236m. Sales were up 1% at Euro1.53bn.

 

The agricultural products business raised Q2 earnings by 24% to Euro212m or 44% to Euro208m after special items, as a stronger product portfolio and more favourable cost structures offset negative currency and divestment effects.

 

Sales grew 2% (volumes 6%, portfolio minus 3%, prices 1% and currencies minus 2%) to Euro1.07bn due to the successful conclusion of the crop protection season in Europe and North America as well as the success of innovative products, especially F500. Inventories and receivables were significantly reduced in Q2, said BASF.

 

Fine chemicals operating income dropped 24% to Euro29m or Euro28m after including special items, due to the startup of a new citral plant, the scheduled shutdown of lysine production and negative currency effects.

 

Revenues were flat (volumes 5%, prices minus 4% and currencies minus 1%) at Euro456m although volumes grew. Human nutrition sales grew, vitamin prices were satisfactory despite rising raw material costs and pharmaceutical active ingredients developed positively, said BASF.  

 

Oil and gas

 

The oil and gas division raised Q2 operating income by 22% to Euro339m on sales up 17% at Euro1.09bn, thanks to higher volumes (16%) and the substantial increase in oil prices. Earnings after special items rose 24% to Euro346m.

 

Regions

 

In Europe, Q2 operating income before special items rose 26% to Euro880m on sales up 12% at Euro5.55bn, with German profits increasing 23% to Euro612m on turnover up 8% at Euro3.64bn.

 

North American operating income nearly quadrupled to Euro204m from Euro52m as revenues rose 11% at Euro2.20bn.

 

Profits in Asia, the Pacific area and Africa more than doubled to Euro68m from Euro31m on turnover up 23% at Euro1.23bn. However, South America income dropped 12% to Euro45m despite revenues rising 11% to Euro335m.

 

As reported earlier today, BASF's group operating profits before special items increased 44% to Euro1.20bn on sales up 13% at Euro9.31bn. After exceptional items, operating income in April-June 2004 grew 53% to Euro1.18bn.

By: Russell Ong
+44 208 652 3214

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