BASF Confirms Outlook for 2012 Despite Growing Economic Risks

LUDWIGSHAFEN, GERMANY–(Marketwire – Jul 26, 2012) –

• 2^nd quarter 2012:
  • Sales up 6% and EBIT before special items up 11% compared with previous year’s quarter
  • Strong business in Agricultural Solutions
  • Lower sales in North America compared to 2^nd quarter 2011
• Outlook full year 2012: increase in sales and earnings targeted

BASF’s business performed solidly in the second quarter. The company improved sales by 6% to EUR19.5 billion and income from operations (EBIT) before special items increased by EUR253 million to EUR2.5 billion. While sales volumes declined in the chemicals business, which comprises the Chemicals, Plastics, Performance Products and Functional Solutions segments, the main contribution came from the strong performance of the Agricultural Solutions and Oil & Gas segments. In the first half of 2012, sales were EUR40.1 billion, 6% more than in the same period of the previous year. At over EUR5 billion, EBIT before special items matched the level of the first half of 2011.

At the presentation of the company’s second-quarter results, Dr. Kurt Bock, Chairman of the Board of Executive Directors, commented on the growing economic risks: “Our customers are continuing to act cautiously and are reducing their inventories, also in expectation of falling prices due to declining raw material costs.” In addition, the Chinese growth engine has started to stall leading to a decrease in BASF’s sales in local-currency terms in Asia in the second quarter, as they also did in the first quarter of 2012, explained Bock.

BASF confirms outlook for full year 2012
A look at the economic developments in the past months and at the order books have led BASF to become more cautious about its expectations for the global economy in 2012 than originally expected at the beginning of the year (previous forecast in parenthesis):

• Growth of gross domestic product: 2.3% (2.7%)
• Growth in industrial production: 3.4% (4.1%)
• Growth in chemical production: 3.5% (4.1%)
• An average euro/dollar exchange rate of $1.30 per euro
• An average oil price of $110/barrel in 2012

BASF does not expect an upturn in demand in the second half of 2012 compared with the first six months of the year. Pressure on margins will continue, although it may be somewhat lessened due to slightly lower raw material costs.

Bock said: “It remains our goal to increase sales and earnings compared with the second half of 2011. Our forecast is especially supported by the resumption of our crude oil production in Libya. It is unlikely that the earnings from our chemicals business will match the level of the previous year. We still aim to exceed the 2011 record levels in sales and EBIT before special items.”

BASF in North America sees sales decline
Sales in North America declined by 15 percent in U.S. dollars. “Our sales in North America were impacted by lower volumes, primarily due to the two month turnaround of the cracker in Port Arthur, Texas,” said Hans Engel, CEO of BASF Corporation, the company’s North American subsidiary. ”While the Agricultural Solutions division generated a strong result, it could not compensate for the weaker performance in the Chemicals segment, in particular.”

To counter the challenges of the markets and the great political and macroeconomic uncertainties, BASF wants to protect its margins and create value. The excellence program, STEP, announced in November 2011, which is expected to contribute around EUR1 billion to earnings each year as of the end of 2015, is fully on track. Measures will be accelerated and spending carefully analyzed. BASF is continuing to optimize its working capital, as is demonstrated by the good cash flow development in the second quarter. Although the company had planned a slight increase in its workforce in 2012, especially in emerging markets, it will slow this down due to the lack of visibility as to when business in Asia will pick up again.

BASF – The Chemical Company

BASF Corporation, headquartered in Florham Park, New Jersey, is the North American affiliate of BASF SE, Ludwigshafen, Germany. BASF has more than 16,000 employees in North America, and had sales of $20 billion in 2011. For more information about BASF’s North American operations, visit www.basf.us.

BASF is the world’s leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. We combine economic success, social responsibility and environmental protection. Through science and innovation we enable our customers in almost all industries to meet the current and future needs of society. Our products and system solutions contribute to conserving resources, ensuring healthy food and nutrition and helping to improve the quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF posted sales of about EUR73.5 billion in 2011 and had more than 111,000 employees as of the end of the year. Further information on BASF is available on the Internet at www.basf.com.

2012-07-27 04:00:13

Source: http://www.marketwire.com/mw/release.do?id=1684228&sourceType=3