(re-leads, adds division performance, CEO commentary)
LONDON (ICIS)--A surge in demand and product pricing for BASF’s chemicals operations saw division earnings more than double year on year in the first quarter of 2017, the Germany-headquartered chemicals major said on Thursday.
First-quarter earnings before interest and tax (EBIT) for the division rose year on year to €974m, with group earnings growth for the year forecast at close to double digits, according to CEO Kurt Bock.
“We want to achieve slightly higher EBIT before special items compared with 2016. In this case, ‘slight’ means a change of one to 10%,” Bock said.
“We expect the increase will be toward the top end of that range,” he added.
The financial impact during the quarter of the after-effects of the harbour fire that broke out at BASF’s Ludwigshafen, Germany, headquarters was offset by an initial insurance payment for the damages.
Overall first-quarter net profit rose 23% year on year to €1.71bn on the back of higher sales volumes, particularly for chemicals products, while sales rose 19% to €16.9bn, backed by an 8% growth in volumes.
First-quarter performance products EBIT fell 8% year on year to €499m due to higher fixed costs and lower margins, while the company’s $3.2bn acquisition of surface treatments specialist Chemetall drove a 15% rise in functional materials EBIT to €521m.
Agricultural solutions earnings fell 10% year on year to €531m during the quarter due to lower margins and higher fixed costs. Oil and gas EBIT rose €103m over the same period to €169m on the back of the crude rally set in motion by OPEC-led supply cuts beginning in January.
First-quarter EBIT rose across all regions, most significantly in Asia Pacific, with the exception of South America, Africa and the Middle East, which saw a 66% drop in earnings.
Despite group EBIT beating analyst expectations, Bock struck a cautious note during a press conference on BASF’s financial performance, citing political uncertainty as the cause for ongoing economic volatility.
“Unfortunately, around the world we are seeing a growing trend towards trying to create prosperity through isolation rather than by cooperation,” he said.
Group forecasts of global economic growth and increases in international chemicals production were left unchanged from earlier estimates at 2.3% and 3.4% respectively. The projected average Brent crude price for the year was also left unchanged at $55/bbl. Image: BASF's Ludwigshafen site. Source - BASF