BASF earnings gain on catalysts, farm chemicals
BASF SE, the world's biggest chemicals producer, said fourth-quarter profit gained 8.3 percent on demand for pesticides and higher-margin catalysts used to control vehicle emissions.
Net income advanced to 793 million euros, or 1.65 euros, compared with 732 million euros, or 1.46 euros, a year earlier, the Ludwigshafen-based company said yesterday.
BASF forecast another year of record earnings in 2008 after last year topped all prior results. Chief Executive Officer Juergen Hambrecht has spent more than $8 billion on purchases since the start of 2006 to steer BASF away from commodities toward more profitable markets. Takeovers include catalytic converter inventor Engelhard, bought for $4.8 billion.
"It's courageous to forecast earnings will rise slightly in this environment," said Norbeth Barth, a Frankfurt-based analyst at DZ Bank AG who rates the stock "buy". "The company is usually rather conservative and always tried to beat its own forecasts."
The German company has added 13 percent in Frankfurt trading over the past year, boosting its market value to 42.25 billion euros. Its US peer, Dow Chemical Co, has lost almost 10 percent. Of the 32 analysts covering BASF, 17 recommend buying, 10 say "hold", and five "sell".
Shareholders will get a 30 percent dividend increase to 3.9 euros a share. BASF said it plans a 1:2 stock split, giving one additional share for each one held, to broaden its investor base.
Earnings before interest, taxes and special items slipped 6 percent to 1.76 billion euros, missing an analyst estimate of 1.8 billion euros. Revenue was little changed at 14.7 billion euros.
Hambrecht spent 2.8 billion euros on buying the construction chemicals division of Degussa AG in 2006, part of his strategy to expand BASF's product mix and limit its dependence on commodity chemicals such as polyolefins, used in bottles, carpeting and toys. Overall, takeovers added 3.6 billion euros to 2007's sales.
The company's products range from glue and fertilizer to animal feed, plastics, automotive resins, detergents and industrial coatings. Its chemicals are used in everything from shampoo, air bags and food flavorings to drugs used to treat conditions such as high blood pressure, hypertension and depression.
"The first weeks of 2008 have run on smoothly from the past year," Hambrecht said in the statement. When drawing up this year's outlook, BASF said it budgeted for a "moderate" slowdown in global economic growth and chemical production, excluding pharmaceuticals, and an average oil price of $78 a barrel for Brent crude.
Like other European chemical suppliers, BASF may see margins squeezed this year by higher material and energy costs.
BASF mitigates the impact by buying oil and gas from Wingas, a joint venture between its Wintershall unit and Gazprom OAO of Russia.
It still has to compete with state-owned Saudi Basic Industries Corp, the world's biggest chemicals maker by market value, which has access to subsidized feedstock. Sabic's fourth-quarter profit increased 12 percent.
Agencies
(China Daily 02/22/2008 page16)
