BASF sees good growth in 2006

27 February 2006 00:00  [Source: ICB Americas]

BASF FORECASTED another good year in 2006 despite the slowdown in some businesses during the fourth quarter.

The planning challenges are in assessing the impact of regional trouble spots, particularly the Middle East, on business conditions, chief executive Jürgen Hambrecht said.

Any escalation could further increase the volatility of raw material prices, particularly for crude oil, and possibly lead to an economic downturn, he warned in Ludwigshafen at the company’s annual results presentation last week.

Hambrecht added, however, that BASF remained confident about volume growth in 2006. “Our business has continued to develop successfully since the beginning of 2006 and the level of orders remains strong,” he said.

“We see strong demand. Signals for the first quarter are very good,” he added.

Hambrecht warned that scheduled plant turnarounds would reduce earnings in the chemicals segment, particularly in the first half of the year, by about €100 million ($119 million).

“Overall, however, our outlook for the full year 2006 is very confident. We aim to grow faster than the market, follow on from the strong level of income from operations before special items posted in 2005, and again earn a premium on our cost of capital.”

BASF reported a 17% increase to €6.14 billion in 2005 underlying earnings before interest and taxes (EBIT). The company said the premium earned on its cost of capital for the year was €2.4 billion, up by €370 million from 2004.

The ethylene cycle was not representative for BASF, Hambrecht said. He added that the performance of producing industries was important for BASF, adding that they would remain healthy globally. “Our business has developed such that we can plan for growth higher than the industrial average.”

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