UpdateBASF sees strong, cracker-led business environment for Q2

06 May 2011 10:07  [Source: ICIS news]

LONDON (ICIS)--BASF is seeing a strong, cracker-led business environment running into the second quarter driven by demand and prices, but has no plans to add significant additional capacity, company executives of the global chemical giant said on Friday.

Various ethylene (C2) producers in the US this reporting season have announced cracker projects expected to take advantage of shale gas feedstock opportunities.

We have seen strong cracker margins throughout the first quarter, we believe primarily driven by strong demand,” management board member and new CFO Hans-Ulrich Engel said.

However, new CEO Kurt Bock added that the company has no plans to add a cracker to its portfolio.

Bock and Engel take their new positions after BASF’s annual general meeting on Friday.

Prices are very strong in the US and demand strong in Europe and Asia, with the favourable margin environment continuing into the second quarter,” Engel added.

BASF reported a powerful” start to 2011 with good capacity utilisation. Net profit in the first quarter of 2011 more than doubled to €2.41bn ($3.49bn) from first quarter 2010 on year-on-year sales, which were 25% higher at €19.36bn.

Operating income – earnings before interest and tax (EBIT) before special items – was up 38.6% from the year-ago period at €2.55bn.

Chemical division operating profits for first quarter 2011 hit a record €765m from €461m in first quarter 2010 and €537m in fourth quarter 2010.

First quarter sales rose 27% year on year to €3.28bn. Sales for the petrochemicals sub-sector were up 28% year on year at €2.21bn. Margins were particularly strong in acrylics and caprolactam (capro).

BASF runs its crackers primarily to support its downstream chemicals activities.

Operating rates are high, Engel said, with the favourable margin situation running into the second quarter.

Demand is strong and this is driving the pricing situation,” he added.

The company is also positive for the near-term business environment.

What we have now on our [order] books gives us some visibility for the next two months,” Bock said.

BASF is a “small” net buyer of propylene (C3), a small net seller of ethylene and a net buyer of butadiene (BD).

$1 = €0.69

For more on BASF, visit ICIS company intelligence

By: Nigel Davis
+44 20 8652 3214

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