BASF profit plummets

(China Daily)
Updated: 2009-07-31 08:01

BERLIN: German chemical company BASF SE warned of a significant drop in sales and earnings this year and its second-quarter net profit plummeted nearly 74 percent to 373 million euros ($526.1 million) as the recession cut into sales and its acquisition of Ciba hit profits.

Ludwigshafen-based BASF, the world's largest chemical company by sales, said yesterday that its net profit in the April-June period compared with 1.3 billion euros a year earlier.

The company cited expenses related to Ciba as well as dropping demand for chemicals and plastics, particularly from auto makers, for the decline.

Sales slipped 23.3 percent to 12.5 billion euros in the quarter compared with 16.3 billion euros a year earlier.

The first six months, the company's net profit fell 68 percent to 1.4 billion euros compared with 4.5 billion euros in 2008 as sales fell 23.3 percent to 24.7 billion euros from 32.2 billion euros.

The company said its second quarter performance was down nearly all of its divisions, including oil and gas, which suffered on the global drop in energy prices. However, those declines were offset by its agricultural products division, which posted higher sales and earnings in the first six months.

Chief financial officer Kurt Bock said that despite the "significant decline" in earnings, BASF was able to increase its cash on hand by cutting costs by 1 billion euros to 3.6 billion euros.

"This financial stability provides BASF with a competitive advantage," he said in a statement.

Bock said that though sales and income were lower than the last year, the downturn "seems to have bottomed out" for now.

"The trough appears to have been reached in North America, and China is again growing faster," he said. "But we see no signs of a sustained upturn."

Because of that, along with expected additional costs related to its 6.1 billion Swiss franc deal to buy Swiss specialty chemicals firm Ciba, Bock said BASF expects more declines in sales and earnings through 2009.

"We are there unlikely to achieve our goal of our cost of capital in 2009," he said.

(China Daily 07/31/2009 page17)