BASF posts very strong results in second quarter of 2007
* Volume demand remains strong: Second-quarter sales climb to €14.7 billion (up 19 percent)
* EBIT before special items reaches €2.0 billion (up 6 percent)
* Further portfolio measures: Strategic options under review for parts of styrenics business
* Outlook for 2007 confirmed: Significantly higher sales, EBIT before special items to at least match the previous year’s record level
BASF – The Chemical Company – remains in top form: In the second quarter and first half of 2007, the company again exceeded the record results posted in the same periods of the previous year. In the second quarter, BASF increased sales by 19 percent and income from operations (EBIT) before special items by 6 percent. Cumulative sales in the first half of 2007 amounted to €29.3 billion, or 18 percent more than in the same period of 2006. In the first half of this year, EBIT before special items rose by approximately 10 percent to €4.1 billion.
“Our significant earnings growth demonstrates that BASF has reached a higher level of sustainable earnings,” said Dr. Jürgen Hambrecht, Chairman of the Board of Executive Directors of BASF Aktiengesellschaft when presenting BASF’s latest results.
BASF has entered the second half of 2007 in stronger form than ever. The demand for chemical products is high, and there are no signs of a summer slowdown.
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BASF confirms optimistic forecast for full-year 2007
Hambrecht expects the economy to continue to develop positively. For 2007, he anticipates global economic growth of approximately 3.5 percent, although with large variations from region to region. BASF’s chairman expects an average euro/dollar exchange rate of $1.35 per euro in 2007. Due to the rise in oil prices, the company has increased its assumption for the average price of Brent crude in 2007 to $65 per barrel.
Risks are seen as lying in the renewed significant rise in the price of oil, the weak U.S. dollar, and tension in conflict areas around the world.
“In our outlook for 2007 we confirm our optimistic expectations: We are confident that we will grow faster than the chemical market. In 2007, we expect significantly higher sales than in 2006. Scheduled plant turnarounds, in particular in the Petrochemicals division, are likely to reduce earnings by €150 million in the second half of 2007. In addition, we plan to further increase spending on research and development. We nevertheless expect full-year EBIT before special items to at least match the previous year’s record level,” said Hambrecht.
BASF’s Chief Financial Officer, Dr. Kurt Bock, commented on the positive development of cash provided by operating activities: “Cash provided by operating activities developed very positively in the second quarter. The cumulative value for the first half was in excess of €2.7 billion compared with €2.2 billion in the first half of 2006.”
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Sales in the Chemicals segment rise by 50 percent
Second-quarter sales in the Chemicals segment climbed 50 percent due to higher sales volumes and prices and the contribution from the acquired catalysts business. EBIT before special items also rose significantly by more than 70 percent, with a considerable contribution from the Petrochemicals division.
In the Plastics segment, sales increased by 10 percent in the second quarter thanks to higher volumes and sales prices. Earnings rose by 15 percent. This was due to significantly higher earnings in the Styrenics division.
In the Performance Products segment, strong sales growth of 37 percent and earnings growth of 24 percent was due primarily to the inclusion of activities acquired in the previous year. The Construction Chemicals division grew very strongly in Europe.
In the Agricultural Products & Nutrition segment, sales increased by 3 percent compared with the second quarter of 2006; EBIT before special items rose by more than 44 percent. Higher sales volumes in the Agricultural Products division more than compensated for negative currency effects. The Fine Chemicals division posted a significant increase in EBIT before special items, in particular due to a reduction of fixed costs.
Sales and earnings in the Oil & Gas segment declined compared with the very high level of the second quarter of 2006 due to lower prices and currency effects.
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Double-digit growth in all regions
BASF’s sales increased in all regions in the first half of 2007. The strongest growth in percentage terms was seen in South America, Africa, Middle East and in Asia.
In Europe, companies posted total sales of €17.4 billion in the first half. This corresponds to an increase of 14 percent. EBIT before special items rose by 6 percent to €3.1 billion. This was due to the acquired businesses and organic growth in the chemical businesses, in particular in Petrochemicals.
Companies in North America increased sales by 26 percent in dollar terms and by 18 percent in euro terms in the first half. EBIT before special items declined by 3 percent to €544 million. This was due to the shutdown of the TDI plant in Geismar, Louisiana, for a number of weeks, as well as currency effects and the impact of divestitures in the Agricultural Products division. The acquired businesses and strong earnings in the Petrochemicals division were unable to offset this fully.
Growth remains strong in Asia Pacific, where BASF increased sales by 34 percent in local currency terms and by 27 percent in euro terms. EBIT before special items also rose considerably by 58 percent to €380 million. The investments in the Verbund sites in Kuantan, Malaysia, and Nanjing, China, are paying off. In Africa and the Middle East, sales rose in particular thanks to the contribution of the Catalysts and Construction Chemicals divisions.
The region South America, Africa, Middle East also made a positive contribution. Here, BASF increased sales by 57 percent in local currency terms and by 51 percent in euro terms. EBIT before special items rose almost threefold. This was due primarily to the agricultural products business in South America. In Africa and the Middle East, sales rose in particular thanks to the contribution of the Catalysts and Construction Chemicals divisions.
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