22 February 2008 16:52 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--BASF is cautious and quietly confident in its outlook but faces some harsh realities. The global credit crisis has by no means been played out. Indeed, it is acquiring nightmarish proportions.
The sharp downturn in housing construction and in the automobile business in ?xml:namespace>
Chemicals producers were fortunate in 2007. With supply/demand balances tight and demand growth strong they were able to lift sales and push prices higher.
One might have expected the chemicals giant to reflect the impact of slower demand combined with higher raw material costs in its fourth quarter.
Yet the negative effects in the financial results published on Thursday were difficult to find.
“The fourth quarter for BASF was a great quarter… we have no reason to hide,” said executive board chairman Jurgen Hambrecht said.
Cracker margins are not as good as they used to be. Business has slowed in
Yet the BASF CEO said the company’s order books are “at the very high end”.
“The first few weeks of 2008 have run on smoothly from the past year,” he added.
But BASF has lowered its chemicals growth forecasts for 2008 - to 2.8% globally.
Its planners currently are working on global GDP growth dropping to 2.8% in 2008 from 3.5% in 2007 with North American GDP growth slowing from 2.2% to 1.6%.
BASF will not be immune to the slowdown, although its portfolio has been shifted away from cyclicality and the breadth of the product base offers some protection from the worst ravages of a downturn.
But does the portfolio also mean that BASF is not yet picking up on the weak spots that ultimately will drive the chemicals markets down?
The chemicals business will not gain its premium of growth over GDP this year. The important
North America sales last year - by customer location - matched those of
Asia-Pacific operating profits (EBIT – earnings before interest and tax) were three and a half times higher in 2007 at €828m. BASF’s
Of greater importance is the fact that
Just how contagious
The portfolio looks robust but the markets may yet be shaky. Stronger evidence of the latter could emerge at any time.
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