BASF with good earnings in 3rd quarter

Thursday, Oct 27, 2011

The past months have been characterized by large fluctuations and turbulence on the international capital markets which have led to worries about the further economic development. These uncertainties also have affected the economic environment of the third quarter of 2011, in which BASF’s business has developed positively overall. Demand remained at a high level. Compared with the first half of the year, growth slowed further as expected. BASF’s customers planned more cautiously, reduced inventories, and partially delayed orders in expectation of possible falling prices.

BASF expects this trend to continue in the fourth quarter and for the full year expects worldwide growth in GDP, industrial and chemical production to be just under one percentage point lower than the company’s previous forecast. “We are managing our inventories  accordingly and are continuing our cost savings programs,” said Dr. Kurt Bock, Chairman of BASF’s Board of Executive Directors in the media telephone conference on the third quarter in Ludwigshafen.

In the middle of October, BASF restarted its oil production in the Libyan desert which had been suspended in February for security reasons after the start of the unrest. Production is currently being ramped up. Initially, a production capacity of 20,000 barrels per day has been achieved. At the moment, it is not possible to say when the maximum daily production capacity of 100,000 barrels of oil will be reached. As soon as enough crude oil has been collected in the fuel storage facilities, it will then be transported via ship. Earnings will only be achieved once this has taken place – probably toward the end of the year.

Despite the suspension of oil production in Libya and negative currency effects, sales increased by 11.6% to €17.6 billion compared with the third quarter of 2010. Income from operations (EBIT) before special items decreased by €249 million to around €2 billion. The third quarter of 2010 included an earnings contribution from oil production in Libya of €355 million, of which €224 million were non-compensable income taxes on oil-producing operations. Excluding this contribution, EBIT before special items was €106 million, or 6%, higher than in the previous third quarter.

Sales volumes in almost all segments were at the same high level as in the third quarter of 2010. In the Oil & Gas segment, production volumes declined substantially due to Libya. Sharply increased raw material costs could be passed on in sales prices in almost all divisions.

BASF grew once again in all regions. In Europe and North America the business acquired from Cognis made a strong contribution. Sales in Asia rose due to price increases as well as good demand in the Catalysts division and in Performance Polymers. Earnings in the Asia region did not match the level of the third quarter of 2010 largely as a result of lower margins in Polyurethanes. In South America, earnings improved thanks to the successful business with crop protection products.

Taking into account the economic risks, Bock stated: “We remain cautious despite the current good performance as economic growth is likely to slow further. In particular, credit restrictions in China, as well as the debt crises in Europe and the United States will adversely impact economic growth. We remain committed to further reducing costs and increasing efficiency. At the same time, we are concentrating on product innovations and the expansion of our business in emerging markets.”

Source: BASF