UpdateBASF shares slump 4% on weak Q2, no recovery seen for H2

30 July 2009 11:22  [Source: ICIS news]

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By Nigel Davis and Mark Watts

BASF in Ludwigshafen, GermanyLONDON (ICIS news)--BASF’s share price fell over 4% on Thursday after the German chemicals giant reported weak second-quarter results and warned of further possible setbacks.

The company’s second-quarter net profits dropped 74% year on year to €343m ($483m) as it continued to be hit by the global economic crisis.

Sales were down 23% at €12.5bn, while earnings before interest and tax (EBIT) before special items were 53% lower at €1.1bn, BASF said.

The company said its chemicals sales were down 30% in the quarter.

Capacity utilisation rose from below 60% in the first quarter to slightly above 60% in the second – much lower that the pre-recession average of around 80%.

BASF said the downturn seemed to have bottomed out but it warned of further possible setbacks.

Group CFO Kurt Bock said there was no reason why the second half would show an improvement on the first, and could possibly be worse.

Oil & Gas and Agricultural Solutions were seasonally stronger in the first six months, while raw material prices for much of the business would increase in line with crude oil, squeezing margins.

BASF's hardest-hit businesses in the second quarter continued to be chemicals, plastics and functional solutions, largely because of their exposure to the depressed automotive and construction industries, BASF said.

Yet sales in the oil and gas business were down in the quarter on lower gas volumes and the lower oil price, BASF said.

BASF said its agriculture business posted higher sales and earnings.

“Overall, we think that the downturn seems to have bottomed out and there seems to be stabilisation at a low level,” CFO Kurt Bock said.

“The trough appears to have been reached in North America, and China is again growing faster. But we see no signs of a sustained upturn.

“There is still the danger of another painful setback due to overcapacities, bankruptcies and growing unemployment,” he added.

BASF had revised its full-year forecast given the still-depressed economic conditions worldwide and based on a decline in chemicals production of 8% and an average oil price of $55/bbl, among other factors, Bock said.

The company said it would take until the end of the 2009 before the global chemicals industry reaches the levels of 2005.

In view of the economic environment and the expenses resulting from the Ciba integration, BASF said it expects a significant decline in sales and earnings in 2009.

“We are therefore unlikely to achieve our goal of earning our cost of capital in 2009,” Bock said.

At 11:32 CET, BASF shares were trading at €33.30, down 4.3% on Wednesday's close.

($1 = €0.71)

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By: Nigel Davis
+44 20 8652 3214



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