25 July 2013 10:23 [Source: ICIS news]
LONDON (ICIS)--BASF maintains its earnings target for 2013 but expects it to be more difficult to achieve, the company said on Thursday after reporting a drop in profits for the second quarter.
“We expect the development of the second half to be rather flat compared to the first half of 2013,” CEO Kurt Bock told an earnings conference.
“Achieving our earnings target is significantly more challenging today than we had expected at the beginning of the year,” the company said earlier.
The chemicals giant has cut its forecasts for global GDP, industrial production and chemicals production growth in 2013. Its forecast for global chemicals production growth in 2013 is now 3.1%, down from an earlier estimate of 3.6%.
“The economic environment is and remains volatile,” Bock said. “The European economy is shrinking slightly; the Chinese growth engine is no longer running at full power; the United States is growing moderately. We are clearly feeling these effects and are doing everything we can to manoeuvre BASF successfully through this challenging environment.”
BASF posted a second-quarter net profit of €1.16bn ($1.53bn), down by 4.2% year on year on sales up 2.9% to €18.4bn, with operating profit (earnings before interest and tax, EBIT) rising by 5.8% to €1.77bn.
Operating profit before special items in the three months to June was down 5.4% to €1.83bn. Earnings from the Chemicals and Performance Products and Other segments were lower than in the second quarter of 2012. Earnings increased strongly in Functional Materials & Solutions, Agricultural Solutions and in Oil & Gas.
Chemicals EBIT before special items were down 18% at €495m, mainly on lower margins from caprolactam and polyamide, BASF said. Performance Products earnings were down 11% at €394m. Functional Materials & solutions earnings were up 36% at €293m; Agricultural Solutions earnings up 17% at €485m and Oil & Gas earnings up 16% at €382m.
In the first half of 2013, the company’s net profit fell 10.6% year on year to €2.60bn.
Sales for January-June 2013 increased 3.9% year on year to €38.1bn, with operating profit declined 7.8% to €3.94bn, BASF said.
Before special items, its first-half operating profit rose 2.5% year on year to €4.05bn, it said.
BASF has turned more conservative in its projections on the global economy, shaving its GDP forecast for this year to 2.0% from 2.4% previously. It further projects a slowdown in global industrial production, with growth decelerating to 2.7% from 3.4% previously.
BASF is estimating the average oil price this year at $105/bbl, down from its earlier projection of $110/bbl.
“Despite this, we still aim to exceed the 2012 levels in sales and EBIT before special items,” Bock said.
($1 = €0.76)
Initial reporting from Pearl Bantillo
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