UpdateBASF maintains positive outlook for 2012 despite growth risks

27 April 2012 12:02  [Source: ICIS news]

(updates throughout with outlook and segment details)

By Leigh Stringer

BASF at LudwigshafenLONDON (ICIS)--BASF on Friday maintained its positive growth outlook for 2012 despite uncertainty in the global economy and a year-on-year fall in net profit in the first quarter.

BASF said business recovered during the first quarter on a sequential basis and it expects global economic growth to continue over the course of 2012, but added that uncertainty on the financial markets may dampen the company’s growth prospects.

“Economic growth could be impaired by the national debt crises in Europe and the US as well as by inflationary trends in Asia,” BASF said.

“Increasing raw material costs could also negatively affect our margins and dampen demand,” it added.

BASF said that in the first half of 2012 it was unlikely to match the “extraordinarily good” levels of the same period last year.

However, BASF said it continues to forecast an increase in sales and income for the second half of 2012 compared with the second half of 2011, with positive stimulus for the chemical industry coming mainly from the emerging markets.

Earlier on Friday, BASF reported a 28.5% year-on-year fall in its net income to €1.72bn ($2.26bn) in the first quarter of this year as higher raw material costs weighed on margins.

Sales for the quarter rose by 6.3% year on year to €20.6bn on the back of higher sales prices and positive currency effects, while earnings before interest, tax, depreciation and amortisation (EBITDA) were up by 15.6% to €3.89bn, the company said in a statement.

By contrast, income from operations before special items fell 7.3% to €2.53bn, the company said.

“Increased raw material costs could not be fully passed on in all business areas, which put pressure on margins,” BASF said.

In BASF’s chemical segment, EBITDA was down 32% year on year to €634m in the first quarter, while sales increased by 6% to €3.5bn.

“Sales increased in the chemicals segment, mainly thanks to positive currency effects and sales to Styrolution Group companies.

“Sales volumes decreased as a result of the optimisation of the supply chain for steam cracker products, carried out in the third quarter of 2011,” BASF said.

EBITDA for the company’s plastics segment fell by 33% year on year to €334m in the first quarter with sales dropping by 4% to €2.7bn.

“Lower margins led to a significant decline in earnings. Furthermore, the scheduled maintenance of the [methyl diphenyl diisocyanate] MDI and [toluene di-isocyanate] TDI plants in Geismar, Louisiana, negatively impacted earnings in the polyurethanes division,” the company said.

Looking to its performance products segment, sales were flat year on year in the first quarter, while EBITDA in the segment dropped slightly by 2% to €636m.

“Demand was slightly lower. Higher sales prices and positive currency effects were able to offset this decrease in volumes. Sharply increased raw material costs put pressure on margins [and] earnings decreased as a result,” said BASF.

However, despite a year-on-year drop in profits in the first quarter of 2012, BASF said it recovered from a weak fourth quarter in the previous year.

The company’s net profit in the fourth quarter of 2011 was €1.13bn, with sales of €18.1bn.

($1 = €0.76)

Additional reporting by Nurluqman Suratman


By: Leigh Stringer
+44 208 652 3214



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