UpdateSpecialties drive BASF 18.5% Q3 net income gain

25 October 2013 11:49  [Source: ICIS news]

(updates with additional information throughout)

LONDON (ICIS)--BASF on Friday posted an 18.5% year-on-year increase in net profits for the third quarter to €1.10bn ($1.53bn), driven by higher earnings from performance products and functional materials.

Sales for the three months ending September 2013 stood at €17.7bn compared with €17.5bn in the same period last year, the company said in a statement, citing increased volumes, particularly in the oil & gas segment.

Third-quarter earnings before interest and tax (EBIT) before special items were up 15% to €1.7bn, while operating income was up 19.9% year on year to €1.68bn, it said, with higher contributions from the functional materials and performance products divisions.

Despite the increase in earnings for the quarter, BASF CEO Kurt Bock said that the global economy had grown slowly during the quarter, and that gains in its home market of Germany were being largely offset by weaker performances in Spain and Italy.

“The US grew slightly, but the markets were unsettled by the budget crisis,” he said, addressing the press after the release of BASF’s third-quarter earnings.

“The Japanese economy benefited from the weak yen and government stimulus measures. Growth in China also picked up somewhat,” he added.

The company reported lower third-quarter EBIT year on year for the chemicals division, down 7% to €527m, on weaker margins for isocyanates in Asia and for ammonia. Performance chemicals EBIT was up 9% year on year to €376m primarily on the back of lower fixed costs, according to BASF.

The functional materials and solutions division enjoyed a strong uptick in the quarter, with EBIT increasing 30% year on year to €300m on the back of “considerably” improved earnings across all divisions except coatings.

Agricultural solutions earnings were stable year on year at €172m as increased investments and negative currency effects offset a 5% increase in sales on the back of BASF’s acquisition of US seed treatment technology company Becker Underwood.

Meanwhile, oil and gas division EBIT fell 15% year on year during the quarter to €422m despite a 25% jump in sales, on the back of decreased production in Libya, higher field abandonment costs and margin pressure in natural gas trading.

Bock added that the performance products division is a current focus of its portfolio restructuring efforts, as some divisions within the business are not performing as well as others. The company announced plans to restructure its pigments division to reduce its presence in Europe and increase it in Asia earlier this week.

“One focus is on the performance products segment where the growth and profitability of some standard products do not yet meet our requirements,” he said

 He added that he hoped to expand BASF’s Verbund network of integrated plants.

We also want to further expand the BASF Verbund, our network of production plants. Main success factors are operational and technological excellence, scale, integration, access to raw materials as well as reliable and low-cost logistics,” Bock said.

Despite the overall increase in earnings, sales were flat or down year on year during the quarter for most regions, with the exception of Europe, where the gradual economic thaw helped to deliver a 5% increase in sales to €9.97bn and a 61% increase in EBIT to €928m.

BASF posted improved EBIT for the Americas, Africa and the Middle East, while sales and earnings for the Asia Pacific region were down 4% and 14% year on year respectively.

The company said that it remains hopeful of beating 2012’s sales and EBIT levels, but added that the macroeconomic environment remains challenging.

“We do not anticipate an upturn in the global economy for the fourth quarter of 2013. The environment is likely to remain challenging: We anticipate uneven development marked by economic uncertainty,” Bock said.

BASF posted a 3.6% decline in net profit to €3.70bn during the first nine months of the year despite a 3.1% increase in sales to €55.8bn. EBIT before special items for the period rose 5.9% year on year to €5.7bn, while operating income dipped 0.9% to €5.62bn, it said.

($1 = €0.72)


By: Tom Brown
+44 208 652 3214



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