BASF sales decline in all regions, demand rises in Asia

31 Jul '09

5 min read

BASF's sales and earnings were again negatively impacted by the ongoing global economic crisis in the second quarter of 2009. The effects on business were especially pronounced in the segments Chemicals, Plastics and Functional Solutions, in particular because of the situation in the automotive and construction industries. Sales in the oil and gas business also declined as a result of lower sales volumes of gas and a considerably lower oil price. The company's strong agricultural products business posted higher sales and earnings.

At a conference call to present BASF's figures for the first half and second quarter of 2009, Chief Financial Officer Dr. Kurt Bock explained: “Thanks to our success in reducing current assets and our measures to improve efficiency and reduce costs, we were able to increase cash provided by operating activities by a total of €1 billion in the first half of 2009 to €3.6 billion despite the significant decline in earnings. This financial stability provides BASF with a competitive advantage.”

Sales in the first half of 2009 amounted to €24.7 billion, or 23 percent less than in the same period of 2008. Income from operations (EBIT) before special items fell by 55 percent in the first half to approximately €2.1 billion.

Second-quarter sales dropped 23 percent to €12.5 billion. Lower volumes and prices contributed 18 percent and 13 percent, respectively, to the sales decline. Currency effects were positive and contributed 3 percent to sales. The Ciba businesses, which were acquired on April 9, boosted sales by 5 percent. EBIT before special items fell 53 percent to €1.1 billion. However, both sales and EBIT before special items improved compared with the first quarter.

“Overall, we think that the downturn seems to have bottomed out and there seems to be stabilization at a low level. The trough appears to have been reached in North America, and China is again growing faster. But we see no signs of a sustained upturn. There is still the danger of another painful setback due to overcapacities, bankruptcies and growing unemployment,” said Bock.

Outlook for full year 2009

BASF has updated its forecast with regard to the underlying economic conditions worldwide in 2009:
• Decline in gross domestic product (minus 3 percent)
• Decline in industrial production (minus 10 percent)
• Decline in chemical production, excluding pharmaceuticals (minus 8 percent)
• Average euro/dollar exchange rate of $1.35 per euro
• Average oil price of $55 per barrel in 2009

In view of this economic environment and the expenses resulting from the Ciba integration, BASF expects a significant decline in sales and earnings in 2009. “We are therefore unlikely to achieve our goal of earning our cost of capital in 2009,” said Bock.

Ciba integration: expected synergies of at least €400 million per year

Board member Dr. Hans-Ulrich Engel explained the current status of the Ciba integration. BASF will complete all major integration measures by the end of the first quarter of 2010. The latest analyses have fully confirmed the strategic rationale for the Ciba acquisition. BASF is now a leading supplier in several areas of specialty chemicals.

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