29 April 2010 10:38 [Source: ICIS news]
(Adds detail about special items in paragraphs 4-5; chemicals performance in paragraphs 10, 12-13; outlook in paragraphs 16-18)
SINGAPORE (ICIS news)--BASF’s first-quarter net profit nearly tripled to €1.03bn ($1.36bn), compared with a gain of €375m in the same quarter of 2009, partly due to higher demand in Asia and South America, the German chemicals major said on Thursday.
Sales in the first quarter climbed by 27% to €15.5bn, compared with €12.2bn in the first three months of 2009, the company said.
BASF’s operating income before special items was up 98% year on year to €1.95bn, mainly due to higher capacity utilisation, it said.
This was offset by special items amounting to €114m, primarily due to the costs associated with the integration of Ciba, the company added.
However, as the integration was now complete, BASF expected synergy gains of €350m by the end of 2010, increasing to more than €450m a year by the end of 2012.
First-quarter earnings before interest and tax (EBIT) nearly doubled to €1.84bn, from €928m in the first quarter of 2009, BASF said.
Limited supplies of certain chemicals as well as restocking of inventories among customers buoyed demand in almost all business divisions, the company said.
Renewed demand was particularly strong from the automotive, electric and electronic industries, which boosted revenues from the company’s core segments such as chemicals and plastics, CEO Jurgen Hambrecht said.
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Alongside improved demand, higher product prices - for cracker products in the petrochemicals unit, for example - boosted sales in all chemicals divisions considerably, BASF added.
Earnings were also substantially higher year on year thanks to high capacity utilisation and improved costs.
BASF said the business environment for plastics had been recovering steadily since the start of 2009, while the styrenics and fertilizer units experienced increasing volume demand, resulting in improved earnings for styrenics in particular.
In the performance polymers division, higher raw materials prices, partially due to limited availability, were largely be passed on to the markets, the company added.
Looking ahead, Hambrecht said that despite the global economic upturn in the first quarter, he expected the economic recovery over the course of the year to slow down.
“This is primarily due to the basis effect through the comparison with the previous year,” he said.
Hambrecht saw risks to the recovery from "the continuing financial and debt crisis, the winding down of national stimulus programs, volatile raw materials markets, excess capacities, growing geopolitical tensions and protectionism".
He cautioned that scheduled plant shutdowns for maintenance would have a negative impact on sales and earnings in the second quarter of 2010.
For example, in the second quarter the firm's entire
However, overall sales were expected to grow again in 2010 and outpace global chemical production, Hambrecht said.
He added: “We anticipate that the income from operations before special items will improve considerably and that we will again earn a premium on our cost of capital.”
($1 = €0.76)
Additional reporting by Elaine Mills
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