BASF's third-quarter EBIT increases 16% on chemicals performance

24 October 2017 11:45 Source:ICIS News

BASF Ludwigshafen panoramic. Source - BASF

LONDON (ICIS)--A €400-500m increase in earnings before interest and tax (EBIT) before special items from its chemicals businesses drove BASF's performance in the third quarter, the German chemical major said on Tuesday.

The company reported a 16% increase in group EBIT before special items in the quarter to €1.8bn on sales up 9% at €15.3bn. It said it expects a strong second half of the year.

“We now expect the BASF Group’s EBIT before special items to considerably exceed the level of the second half of 2016,” said CEO Kurt Bock.

“We are maintaining our forecast for sales, EBIT before special items and EBIT for full-year 2017: We expect them to increase considerably. The same now also applies to EBIT after cost of capital, for which we previously anticipated a slight increase.”

Third-quarter profits from the chemicals segment came in much stronger than forecast, with EBIT before special items  increasing by €614m year on year to €1.1bn. Chemicals segment sales were up 25% at €4bn.

The profits increase was driven by higher prices and stronger margins for monomers such as isocyanates as well as cracker products.

BASF said that its petrochemicals margins improved worldwide, particularly for acrylic monomers and steam cracker products in Europe.

Performance Products segment EBIT before special items were €88m lower at €385m due to higher costs for the upstream intermediates that feed businesses in the segment such as care chemicals and performance chemicals but primarily because of a further drop in vitamin prices.

The raw material costs effect was also apparent in the Functional Materials & Solutions segment where EBIT before special items dropped €100m to €397m.

There were considerable margin-related declines in earnings in construction chemicals, coatings, catalysts and performance materials, mainly because of higher raw material costs.

According to CFO Hans-Ulrich Engel, cost increases of as much as 60% were passed on through the BASF verbund in the quarter to the company’s downstream businesses.

EBIT before special items from the Agricultural Solutions and Oil & Gas segments were also lower.

Bock said that BASF had seen very good volume growth in Asia in the quarter with strong growth outside China.

“We also see good, continuous development in Europe,” he added. North America was somewhat flat.

The company reported group volumes up 4% in the quarter, with prices up 7%.

Image: BASF Ludwigshafen panoramic. Source - BASF

By Nigel Davis