BASF delivers exceptional results in difficult times

31 Oct '08

5 min read

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.

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