UpdateBASF Q2 net profits leap to €1.18bn on 30% sales growth

29 July 2010 12:17  [Source: ICIS news]

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BASF CEO Jurgen HambrechtLONDON (ICIS)--BASF's second-quarter net profits leapt to €1.18bn ($1.53bn) from €343m in the same period a year earlier on much higher sales of chemicals, plastics and performance products, the chemicals giant said on Thursday.

The chemicals operating performance particularly beat analysts' forecasts by a considerable margin, although some were reluctant to extrapolate the rebound given recent softening in upstream prices and margins, and because of limited visibility.

“All divisions made a significant contribution to earnings,” said BASF chairman Jurgen Hambrecht in a conference call. “Impetus for growth came from all regions. Overall, we are well on track to achieve the pre-crisis level of earnings.”

The company had seen very high demand in all its chemicals segments (those segments excluding oil and gas and agrochemicals) across all regions, augmented by restocking, he added.

Chemicals sales for the quarter were up 64% year on year, plastics sales jumped 48% and performance products sales grew 29%, helping to push group sales 30% higher to €16.21bn.

BASF said that its earnings strength in the chemicals business had “improved sustainably”.

Second-quarter 2010 earnings before interest and tax (EBIT) before special items were up 94% year on year at €2.21bn.

Hambrecht said he expected the economic recovery to continue at a moderate pace in the second half of 2010.

“The necessary consolidation of government budgets around the world will dampen demand, as will the winding down of national stimulus programmes,” he added as he warned of the dangers of sovereign debt.

BASF had not perceived any decline in business, however, he said.

“We expect our sales to grow in 2010 and outpace global chemical production.”

“We anticipate that EBIT before special items will improve considerably and we will again earn a premium on our cost of capital. According to our dividend policy, we expect a higher dividend for 2010.”

BASF is forecasting global chemicals production of between 7-8% in 2010 based on GDP growth of 3-4%.

“We are not yet back at capacity levels we have seen before,” Hambrecht said, commenting on the bottlenecks seen in some chemical intermediates streams. He added, however, that the company's crackers and C4 units were fully laden.

BASF's shares were up 0.86% at €45.72 at 11:53 CET on Thursday.

($1 = €0.77)

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By: Nigel Davis
+44 20 8652 3214

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