UpdateFinancial turbulence hits BASF's growth prospects

27 October 2011 14:43  [Source: ICIS news]

(releads and updates throughout)

By Abache Abreu and Franco Capaldo

BASF chairman Kurt BockLONDON (ICIS)--Turbulence on the international capital markets has impacted BASF's growth prospects as customers are forced to reduce inventories and delay orders in anticipation of falling prices, the Germany-based chemicals major said on Thursday.

“This careful deceleration [by customers] is certainly better than maintaining production unchanged and hoping that the crisis of confidence in politics can be solved quickly and comprehensively,” chairman Kurt Bock said during the company's third-quarter earnings presentation.   

“We remain cautious ... as economic growth is likely to slow further. In particular, credit restrictions in China, as well as the debt crises in Europe and the US will adversely impact economic growth,” he added.

BASF's third-quarter net profit slipped by 4.3% year on year to €1.19bn ($1.65bn), as higher costs offset the strong gains in sales, while third-quarter income from operations before special items decreased by 11.3% to €1.96bn compared with the same period last year.

Sales for the three months ending 30 September 2011 grew by 11.6% year on year to €17.6bn, the company said in a statement.

In BASF’s chemicals and plastics segment, sales increased in all divisions as significantly higher prices in several business areas contributed to improved results. The company added that slightly lower volumes overall, as well as negative currency effects, were more than offset by price increases.

Its Performance Products segment reported strong sales on the back of the inclusion of the Cognis businesses and higher selling prices, the company added.

BASF also said the absence of production volumes from Libya in its oil and gas segments, where operations were suspended in February for security reasons, had a negative impact on sales.

“Additional rises in raw material costs could be passed on to the market in almost all divisions, which more than compensated for currency effects of minus 4%,” Chief Financial Officer, Hans-Ulrich Engel said, referring to group sales.

However, the question remains whether a further deterioration of the European and global economic climates will leave room for price increases throughout the fourth quarter.

“Our estimates are a bit more conservative than they were three months ago due to the macroeconomic development,” Bock said.

In response to the continuous downward economic trend, the company is set to continue taking cost-cutting measures and increasing efficiency, Bock added.

($1 = €0.72)

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Pearl bantillo contributed to this article


By: Abache Abreu
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