FOCUS: BASF stresses focus on value and growth

26 April 2007 17:04  [Source: ICIS news]

LONDON (ICIS news)--BASF pressed home some key messages on Thursday following the release of its first quarter 2007 financial results and is confident going into 2007.

The acquisitions made in 2006, not just catalysts maker Engelhard, the former Degussa construction chemicals business and Johnson Polymer, but also CropDesign and the fuel cell component maker PEMEAS, will help lift sales – as will continued organic growth.

Chief executive Jurgen Hambrecht also stressed to shareholders at the annual meeting that to match last year’s EBIT (earnings before income and tax) before special items of €1.7bn ($2.3bn) is an ambitious goal. The company is planning against an average oil price of $55 a barrel, $10 down on 2006.

BASF produced 13% higher EBIT in the first quarter compared with the similar period of last year at €2.1bn on 17% higher sales of €14.6bn. Net income rose 9% to €1bn..

The new acquisitions helped in lifting sales and earnings. Top line growth in the chemicals, plastics and performance products segments was 29%.

Chemicals earnings almost doubled with petrochemicals up slightly on good cracker margins in Europe and Asia and better profitability in intermediates.

Plastics EBIT was slightly lower with polyurethanes down – the company’s TDI (toluene diisocyanate) plant in Geismar, Louisiana, was shut down temporarily in the quarter – but styrenics earnings almost doubled. Performance products profits were lower largely on competitive pressure in Asia.

Agricultural products EBIT was up slightly and profits in fine chemicals up sharply due to a reduction in fixed costs. Exploration and production profits in the oil and gas segment were lower due to the lower oil price but segment EBIT was higher due to what BASF called a “significant contribution” from trading natural gas in the European spot market.

Looking out into 2007, the company was expected to gain further from last year’s acquisitions and from continued restructuring.

The divestment of the majority of its animal nutrition pre-mix business and the exit from lysine were seen as important steps. BASF says the strategy is to increase efficiency and streamline structures in nutrition to focus on growth areas in cosmetics and pharmaceuticals.

Chemicals EBIT in the second half will be hit to the tune of about €100m from cracker turnarounds in Port Arthur, Texas, and in Antwerp, Belgium. The Antwerp turnaround will be used to start up an ethylene expansion of some 35% in a project initiated two years ago.

Hambrecht reiterated the point that the 2006 acquisitions would help BASF become more cyclically resilient overall. Synergy effects were significantly higher than expected at €290m a year, he said, a level of saving expected to be achieved by 2010.

He stressed the importance of global partnerships such as those with Sinopec, Petronas, Dow, Gazprom and most recently Monsanto. BASF plans to invest $900m in the expansion of its Sinopec joint venture site in Nanjing, China. More than $3.5bn will be invested in exploring and producing oil

And gas, transporting the gas through the new Nord-Stream Pipeline and in distributing it in Europe, he said. The joint budget for BASF’s biotechnology project with Monsanto is potentially up to $1.5bn.

Hambrecht said BASF lifted research and development (R&D) spending last year by 20% to €1.3bn and that the increase in 2007 would be to approximately $1.4bn. About one-third of that amount will be dedicated to energy efficiently, resource conservation and climate protection, he said.

($1 = €0.73)

By: Nigel Davis
+44 20 8652 3214

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