BASF says agchems unit on target for 'highest returns'

LIMBURGERHOF, Germany (CNI)--BASF´s agricultural products business is on target to achieve "one of the highest returns in the industry", it was claimed here on Thursday.

Hans Reiners, president of the business, said figures posted for the first half of 2004 suggest that by next year, or 2006 at the latest, an EBITDA (earnings before interest, taxes, depreciation, and amortisation) return (before special items) of 25% could be achieved.

In H1-2004, the margin was 30.2%. Returns are traditionally weighted in the first half due to seasonal factors. In 2002 and 2003, margins were 16.2% and 21.3% respectively.

"The performance that brought us success in the first half of the year will also benefit us in the second half," said Reiners. "We are confident that we can fulfill the expectations placed in us. We should be able to increase sales compared with 2003. At the same time, we will further reduce our assets - especially inventories and receivables."

The agricultural chemicals business recently reported first half sales of Euro2.05bn ($1.67bn), up 9% on last year - a 21% increase in dollar terms. Key to the sales growth has been the development of new products, the significant increase of business in South America and the acquisition of fipronil from Bayer CropScience in March 2003.

Following the recent success of its new fungicide, F500, in South America, BASF has also revised its sales targets for the product (including those which use it as a mixture partner) from Euro300m to Euro400m by 2006. The strong performance of the business in the region helped to improve growth by 95% compared with 2003 levels (from Euro125m to Euro244m). European sales were less significant, although they rose by 7% during the first half of the year (Euro992m from Euro926m).

BASF said today it will continue to focus on "attractive markets in which our core competencies are rewarded". These include Europe, North America, Brazil, Japan and South Korea.

A total of 13 new products are also planned, with peak sales potential of around Euro1.5bn/year. Reiners added that six of the products are already in "market launch phase" and could generate approximately Euro800m in annual sales. These products comprise three herbicides, two fungicides and one insecticide.

The seven new products in development comprise four fungicides, two herbicides and one insecticide.