Bernstein Research predicts 2012 fall in BASF earnings

07 March 2012 11:53  [Source: ICIS news]

BASFLONDON (ICIS)--Bernstein Research expects BASF’s earnings to fall in 2012, on the basis that recent fixed cost inflation trends will continue and on the company’s plans to grow from highly taxed Libyan oil production, the global analysts said on Wednesday.

“Fixed cost inflation significantly exceeded volume and portfolio growth in 2011. We believe German chemicals industry wage inflation of plus 5% (compared [with] the long term trend of 2-3%) was a key driver,” Bernstein said.

Bernstein said it also believes some BASF observers and analysts have interpreted the management’s guidance of flat earnings before interest and tax (EBIT) as stable.

“However, this guidance could actually mean earnings per share (EPS) will decrease in 2012, since BASF will grow EBIT from the highly taxed Libyan oil production,” Bernstein added.

It also said that in the short term, indicators are pointing to a weak start for the the Germany-based chemicals major in 2012.

“In particular, we expect a weak start to the year for BASF Chemicals and Plastics segments,” it added.

Bernstein said BASF’s orders and production activity in January and February 2012 increased, but only slightly compared with the previous month.

“This implies they have not made up the volume lost in late 2011,” it added.

Despite the weaker outlook, Bernstein maintains the company’s “market-perform” rating with a $58 (€44) share price target.

($1 = €0.76)

By: Leigh Stringer
+44 208 652 3214

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