UpdateGermany’s BASF aims for higher sales, EBIT in 2012

25 October 2012 10:32  [Source: ICIS news]

(releads, adds outlook and comment from chairman)

BASF Ludwigshafen siteLONDON (ICIS)--BASF’s chairman Kurt Bock said on Thursday the German petrochemical major is still aiming for 2012 sales and EBIT before special items to exceed 2011 record levels, despite revising downwards its expectations for the global economy.

“We do not anticipate an upturn in the global economy or in demand in our chemicals business for the fourth quarter of 2012; however, we still aim to exceed the 2011 record levels in sales and EBIT [earnings before interest and taxes] before special items,” Bock said.

“Our forecast is supported by the resumption of our crude oil production in Libya and by our successful business with crop protection products,” the chairman added.

For the full year of 2011, BASF’s overall sales rose by 15% year on year to €73.5bn ($95.5bn), while EBIT, or operating income, rose 11% to $8.6bn.

BASF expects global GDP in 2012 to grow by 2.2%, down from its original estimate of 2.3%, while growth in industrial production is now predicted at 2.8%, down from 3.4%. Growth in chemical production during 2012 is expected to be at 2.9%, down from 3.5%.

“In China, growth in the third quarter of 2012 has slowed once again compared with the same quarter of the previous year. Dampening effects came mainly from export demand, but also from the real estate market. We see stabilisation at the current level, but no visible upturn. Correspondingly, demand in the chemical industry in China remains subdued,” Bock said.

“In this challenging environment, we are concentrating on our strengths and expanding our business, but we are also keeping an eye on the costs and are continuing to optimise our business processes,” he added.

At the beginning of this week, BASF signed an agreement with producer Statoil to expand its production of oil and gas on the Norwegian continental shelf, while in the third quarter, the group took steps to strengthen its crop protection business, with plans to acquire US-based biological seed treatment technology provider Becker Underwood for $1.02bn

On 12 October, BASF also said it will acquire sections of the global toluene diisocyanate (TDI) business of Polish state chemicals manufacturing group Ciech.

However, Bock also said it was just as important to be proactive when the business prospects become less favourable or the competitive landscape changes.

“This is the case for example for the European construction industry, which is showing ongoing weakness, particularly in southern Europe. This, of course, affects our business with construction chemicals,” he said.

Earlier in October, BASF announced it would cut 400 jobs from its construction chemicals business and shift focus for the unit away from southern Europe and the UK, where construction demand remains weak, and plans to sell MEYCO Equipment, its Swiss concrete spraying machine business, as a non-core asset.

Bock also revealed that earnings from its chemicals business in 2012 will not match the level of the previous year.

Earlier on Thursday, BASF reported that its third-quarter net profit declined by 21% year on year to €946m, partly on lower earnings from its chemicals segment, while sales for the three months to September grew 8.0% to €19.0bn, with operating income rising 6.4% to €2.00bn.

In its Chemicals segment, sales grew significantly in comparison with the previous third quarter, partly because of sales to Styrolution Group companies in addition to positive currency effects and higher sales volumes. However, earnings declined considerably, owing to lower margins as well as to plant shutdowns in the group’s Petrochemicals division, BASF said.

“Sales volumes grew principally as a result of increased production of crude oil. We were also able to improve sales volumes in the Chemicals and Agricultural Solutions segments. Positive currency effects provided a tailwind,” Bock said.

“The higher contribution from the Oil & Gas and Agricultural Solutions segments more than offset lower earnings in the chemicals business (which comprises the Chemicals, Plastics, Performance Products and Functional Solutions segments),” he added.

($1 = €0.77)

By: Franco Capaldo
+44 (0)20 8652 3214

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