Ludwigshafen, Germany
October 30, 2008
- Third quarter 2008:
− Strong sales growth (+13 percent, disregarding currency
effects +18 percent) due to substantial price increases and
volume growth
− Earnings improvement in operating segments (+7 percent)
despite significantly higher raw material costs and impact
of the hurricanes in the United States
− EBIT before special items of BASF Group declines 8 percent
due to significant expenses in Other
- Focus on cash flow,
operational excellence and sustainability – “NEXT” program
to increase efficiency started: Earnings contribution of
more than €1 billion per year as of 2012
- Outlook 2008: BASF will
make every effort to match the previous year’s excellent
earnings
BASF
SE – The Chemical Company – has ended the third quarter with
solid results in a significantly more difficult economic
environment. All operating divisions increased their prices, and
volumes rose in almost all segments. Overall, sales rose by 13
percent to €15.8 billion. Adjusted for currency effects, sales
grew by 18 percent.
BASF also increased earnings in its operating segments
(excluding Other) by 7 percent – despite further increases in
raw material costs,
declining demand from important customer industries and the
hurricanes on the U.S. Gulf Coast, which alone reduced earnings
by more than $100 million. Income from operations (EBIT) before
special items of BASF Group declined by 8 percent, in particular
due to significantly lower earnings in Other. Here, significant
expenses from hedging naphtha purchases against increasing
prices were incurred as a result of the fall in oil prices
toward the end of the quarter.
Dr. Jürgen Hambrecht, Chairman of the Board of Executive
Directors of BASF SE said: “The impact of the global financial
crisis on the real economy is speeding up and hitting harder.
The economic skid marks can no longer be ignored. The decline in
demand in important markets, stockpiling by our customers and
the fall in oil prices are all signs of a recessionary trend
that is likely to sharpen in 2009.”
Worldwide, BASF is responding to declining demand by adjusting
capacity utilization rates and bringing forward
maintenance-related shutdowns. In addition to ongoing activities
to reduce costs, the company has launched a new efficiency
program, “NEXT,” in October with the goal of increasing
operational excellence and effectiveness.
NEXT stands for a new dimension of value creation at BASF. The
program involves all regions, divisions and functions at BASF
and encompasses more than 500 individual projects. These range
from the simplification of processes and increased bundling of
resources through to the use of new IT technologies. Together
with its ongoing efficiency programs, BASF expects NEXT to
contribute more than €1 billion to earnings per year as of 2012.
A large proportion of this amount is expected to be achieved as
early as 2009 and 2010.
BASF will make every effort to match the previous year’s
excellent earnings
In the months ahead, Hambrecht expects many challenges for
BASF’s business: “We have therefore revised our assumptions and
are now reckoning with global economic growth in 2008 of below
2.7 percent and chemical production growth of below 2.0 percent.
We expect an average oil price (Brent) of $105 per barrel in
2008 and an average euro/dollar exchange rate of $1.45 per euro.
In addition to volatile raw material costs, we see risks in a
further economic downswing.”
In view of these underlying conditions and based on the
assumption that there will be no further adverse developments
that cannot be foreseen at present, BASF has revised its outlook
for the full year: The company expects to increase sales in 2008
and will make every effort to match the previous year’s
excellent EBIT before special items.
Sales increase in all segments
In the Chemicals segment, BASF increased sales
significantly by 19 percent, above all due to higher prices and
slightly higher volumes. Sales increased in all divisions. EBIT
before special items declined, primarily as a result of lower
margins for cracker products as well as plant shutdowns due to
the hurricanes on the U.S. Gulf Coast.
Sales in the Plastics segment increased by 4 percent. Due to the
slowdown in the automotive and construction industries, higher
raw material costs could not be passed on sufficiently to the
market. In addition, earnings were negatively affected by plant
shutdowns due to the hurricanes on the U.S. Gulf Coast.
The Performance Products segment posted a 5 percent
increase in sales. Prices were raised substantially, in
particular in the Care Chemicals division. EBIT before special
items rose significantly thanks to the strong performance of
Care Chemicals and reduced fixed costs in all divisions.
The Functional Solutions segment increased sales slightly
by 1 percent despite the substantially reduced demand from the
automotive and construction industries. Earnings declined in the
Construction Chemicals and Coatings divisions because higher raw
material costs could not be passed on fully to the market. The
increase in earnings in the Catalysts division was not
sufficient to compensate for this.
BASF achieved sales growth of 11 percent
in the Agricultural Solutions segment thanks to higher
volumes and prices. Adjusted for currency effects, sales grew by
17 percent. The relatively high price level for agricultural
products resulted in strong demand for innovative crop
protection agents. Although the third quarter generally tends to
be weak due to the seasonal nature of the business, the company
increased earnings significantly and reached a record value.
Sales in the Oil & Gas segment increased by 46 percent,
in particular due to the higher oil price and a rise in volumes
in the Natural Gas Trading business sector. Earnings also rose
considerably as a result of the oil price. Earnings in Natural
Gas Trading were negative as a result of the time lag in
adjusting sales prices to purchase prices.
BASF is the world’s leading chemical company: The Chemical
Company. Its portfolio ranges from oil and gas to chemicals,
plastics, performance products, agricultural products and fine
chemicals. As a reliable partner BASF helps its customers in
virtually all industries to be more successful. With its
high-value products and intelligent solutions, BASF plays an
important role in finding answers to global challenges such as
climate protection, energy efficiency, nutrition and mobility.
BASF has more than 95,000 employees and posted sales of almost
€58 billion in 2007. BASF shares are traded on the stock
exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). |
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