Chems, agri boost BASF Q4 net income despite oil, gas EBIT slump

Tom Brown

27-Feb-2015

(re-leads, adds division performance, global outlook)

Headquarters of the BASF Group - LudwigshafenLUDWIGSHAFEN, GERMANY (ICIS)–Stronger performances by its chemicals and agricultural solutions divisions helped drive a 25.7% year-on-year increase in net income for BASF to €1.42bn despite lower profits for its oil and gas operations, the Germany-headquartered chemicals major said on Friday.

Sales slipped by 0.6% year on year to €18bn in the fourth quarter while earnings before interest, taxes, depreciation and amortisation (EBITDA) was up by 10.8% at €2.87bn, the company added.

Earnings before income and taxes (EBIT), before special items, was up by 2.8% year on year at €1.5bn in the fourth quarter of 2014, BASF said.

CEO Kurt Bock said the improved fourth-quarter performance was achieved “despite the disappointing economic development in Europe.”

“We further strengthened our chemicals business and in turn improved our margins,” he added.

Tailwinds from shifting currency rates added a 2% sales uplift compared to the same quarter a year earlier, but this was more than offset by the fall in oil prices, which reduced sales revenues by 4%, BASF added.

With its chemicals operations and its Wintershall oil and gas subsidiary, the sharp fall in oil prices over the last six months is a mixed blessing for BASF, but the boost to chemicals and industrial production is likely to be an overall positive, according to CEO Kurt Bock.

“We… anticipate somewhat stronger growth in the global economy, industrial production and the chemical industry than in 2014,” he said.

BASF is predicting global growth of 2.8% and an average Brent crude oil price of $60-70/bbl this year.

Chemicals division earnings before interest and taxes (EBIT) and special items rose €70m year on year to €580m on the back of higher contributions from the petrochemicals division, while performance products division  before special items was steady over the same period at €217m.

Despite an “increasingly gloomy market” for Performance Products materials over the course of 2014, increased sales volumes with stable prices helped to offset negative currency effects, BASF said.

Functional Materials and Solutions saw an €18m year on year decline (-7.6%) in EBIT before special items for the quarter to €220m despite improved contributions from the catalysts and coatings division.

Agricultural Solutions division EBIT before special items increased €56m year on year to €123m (up 83.6%) during the quarter thanks to strong European and North American demand, as well as greater demand for fungicides and herbicides, BASF said, while oil and gas EBIT before special items was €155m below fourth-quarter 2013 levels at €347m (down 30.9%) on the back of lower oil and gas prices, BASF added.

For the full year of 2014, the company posted a 7.6% increase in its net income to €5.16bn, with sales up by 0.5% at €74.3bn, it said.

BASF’s EBITDA in the full-year of 2014 rose by 5.9% year on year to €11.0bn, the company added.

Its EBIT, before special items, rose by 4.0% year on year to €7.36bn in 2014.

“The global economy will continue to face substantial risks. In this volatile and challenging environment, we want to perform well and increase sales slightly in 2015,” said Kurt Bock, the chairman of the board of executive directors at BASF.

EBIT before special items in 2015 will likely match the previous year’s level, the company said.

“The company expects considerably larger contributions from Performance Products, Functional Materials & Solutions and Agricultural Solutions. EBIT before special items in the Chemicals segment is likely to decline slightly because of expenses for starting up several plants,” it added.

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