26 July 2012 10:53 [Source: ICIS news]
LONDON (ICIS)--BASF does not expect global economic growth to pick up in the second half of the year and believes it unlikely that earnings from its chemical businesses in 2012 will match those of 2011, the company said on Thursday.
The goal is to increase group sales and earnings but growth will be underpinned by the Oil & Gas and Agricultural Solutions segments, it added.
“We still aim to exceed the 2011 record levels in sales and income from operations before special items. Our forecast is especially supported by the resumption of our crude oil production in Libya,” BASF said.
Oil & Gas profits were significantly higher in the second quarter at €880m ($1.07bn) from €332m in the equivalent period in 2011. Agriculture segment earnings before interest and tax (EBIT) before special items were up €83m at €414m but the company’s chemical product businesses returned lower profits. Group EBIT before special items was up 11.3% in at €2.49bn.
Sales volumes in the chemical segments, which include Chemicals, Plastics, Performance Products and Functional Solutions, were lower but offset by growth in Agricultural Solutions and Oil & Gas.
Group sales were up 5.5% at €19.48bn with no year-on-year group-wide volume growth, a 1% increase in prices and a 5% positive currency effect.
BASF said its sales in Europe excluding Oil & Gas had fallen by 2% in the quarter.
“Overall, sales volumes worldwide were at the level of the previous year,” CEO Kurt Bock said. “However, in the chemicals business, volumes declined as our customers continued to act cautiously. They reduced their inventories further, also in expectation of falling prices due to declining raw material costs.”
Bock said BASF had expected a weaker year-on-year sales performance in the first half of 2012 but an upturn in demand in the second half.
“At the beginning of the year, however, we could not have anticipated that the Chinese growth engine would start to stall. In the second quarter our sales in Asia decreased in local-currency terms – as they did in the first quarter of 2012.”
Bock said that BASF’s volumes in China had been flat in first and second quarters, a sharp contrast to previous quarterly growth.
“No-one can tell when business will pick up again,” Bock said. Customers were acting very cautiously he added, and continue to reduce inventories to the very minimum.
“There are no signs to show that there will be a revival in the second semester,” he said.
($1 = 0.82)
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