UpdateBASF shares fall despite Q3 EBIT growth

30 October 2007 14:15  [Source: ICIS news]

BASF CEO Jurgen Hambrecht

(Releads, updates and adds detail throughout)


LONDON (ICIS news)--BASF’s share price dropped by over 2% on Tuesday despite the company reporting strong gains in third quarter earnings and predicting record full-year results.


An equities analyst said that although BASF's shares had rallied before the results announcement, the group's earnings did not exceed investors' expectations.


The German chemicals major posted a 17.5% year-on-year rise in its third quarter earnings before interest and tax (EBIT) to €1.7bn ($2.46bn), with good growth in the chemicals segment balancing losses from planned plant turnarounds.


Net sales were up 5% to €13.96bn compared with the year-earlier period due to higher sales volumes and prices.


However, shares were down 2% from Monday’s close at €96.32 (2:30 CET).


A Citigroup equity analyst said BASF’s third quarter underlying EBIT was slightly below its estimates, although in line with the general analyst consensus.


In the chemical segment, the company’s third-quarter EBIT was up 119% to €501m and its sales were up 5% to €3.6bn.


All chemicals divisions contributed to the growth with the exception of petrochemicals, which was hit by scheduled plant turnarounds, said the company.


In the post-announcement conference call, CFO Kurt Bock said the company expects €150m of losses from plant turnarounds in the second half, evenly split evenly between quarters, suggesting a €75m negative impact in the third quarter.


In the plastics segment EBIT fell 4% to €293m, but net sales were up 3% to €3.36bn.


“The plastics segment was not able to post good results due to a decline in performance polymers, which can be attributed to negative currency effects and production outages,” the company said.


The agricultural products business improved to a €12m operating loss from a loss of €55m in the year earlier period driven by higher volumes and sales prices.


Fine chemicals recovered from a €26m loss in the year earlier period to book an EBIT of €48m drive by a “great improvement” in the nutrition unit.


BASF’s performance polymers segment booked a 14% rise in EBIT to €206m, with sales up 1% at €2.99bn. Sales in the division were buoyed by good demand for construction chemicals and coatings in China and the Middle East.


In oil and gas, EBIT dropped 13% year-on-year to €657m due to a decrease in oil production and falling margins in natural gas trading.


In its outlook, BASF said it expected scheduled plant turnarounds, in particular in petrochemicals, to reduce earnings in the fourth quarter. Bock suggested the loss would amount to around €75m.


The company said it expects to post sales of €58bn for the full-year 2007 and a higher EBIT for the period based on global economic growth of 3.5% and an average Brent oil price of $70/barrel.


“Our overall target is to grow faster than the chemicals market by 2%. There is no reason to be pessimistic for the foreseeable future,” said Bock.


Citigroup said it expected BASF’s full-year EBIT to come in 8% higher than last year mainly due to the rise in oil prices.


($1 = €0.69)

By: Mark Watts
+44 20 8652 3214

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