BASF With Good Earnings in 3rd Quarter

- Demand at high level

- North America: Sales and earnings significantly above third quarter 2010

- Outlook for 2011: Sales and earnings still expected to significantly exceed previous year’s level

News provided by

Oct 28, 2011, 01:12 ET

FLORHAM PARK, N.J., Oct. 28, 2011 /PRNewswire/ -- The past months have been characterized by large fluctuations and turbulence on the international capital markets which have led to worries about the further economic development. These uncertainties also have affected the economic environment of the third quarter of 2011, in which BASF's business has developed positively overall. Demand remained at a high level. Compared with the first half of the year, growth slowed further as expected. BASF's customers planned more cautiously, reduced inventories, and partially delayed orders in expectation of possible falling prices.

BASF expects this trend to continue in the fourth quarter and for the full year expects worldwide growth in GDP, industrial and chemical production to be just under one percentage point lower than the company's previous forecast. "We are managing our inventories accordingly and are continuing our cost savings programs," said Kurt Bock, Chairman of BASF's Board of Executive Directors in the media telephone conference on the third quarter in Ludwigshafen.

In the middle of October, BASF restarted its oil production in the Libyan desert which had been suspended in February for security reasons after the start of the unrest. Production is currently being ramped up. Initially, a production capacity of 20,000 barrels per day has been achieved. At the moment, it is not possible to say when the maximum daily production capacity of 100,000 barrels of oil will be reached. As soon as enough crude oil has been collected in the fuel storage facilities, it will then be transported via ship. Earnings will only be achieved once this has taken place – probably toward the end of the year.

Despite the suspension of oil production in Libya and negative currency effects, sales increased by 11.6% to euro 17.6 billion compared with the third quarter of 2010. Income from operations (EBIT) before special items decreased by euro 249 million to around euro 2 billion. The third quarter of 2010 included an earnings contribution from oil production in Libya of euro 355 million, of which euro 224 million were non-compensable income taxes on oil-producing operations. Excluding this contribution, EBIT before special items was euro 106 million, or 6%, higher than in the previous third quarter.

Sales volumes in almost all segments were at the same high level as in the third quarter of 2010. In the Oil & Gas segment, production volumes declined substantially due to Libya. Sharply increased raw material costs could be passed on in sales prices in almost all divisions.

BASF in North America continued to perform well

In North America sales grew by 16% in U.S. dollars and by 7% in euro terms. Earnings before special items at euro 301 million were 26% above the level of the previous third quarter. "BASF in North America continued to perform well in the third quarter of 2011," said Hans Engel, CFO of BASF SE and CEO of BASF Corporation, the company's North American subsidiary. "Despite slower growth overall, third quarter sales and earnings in North America increased significantly. The acquisition of the Cognis businesses strengthened regional sales considerably. Our chemicals business developed positively overall. Agricultural Solutions also increased sales thanks to a weather-related shift of the application period for corn and soybeans."

Also in Europe the business acquired from Cognis made a strong contribution. Sales in Asia rose due to price increases as well as good demand in the Catalysts division and in Performance Polymers. Earnings in the Asia region did not match the level of the third quarter of 2010 largely as a result of lower margins in Polyurethanes. In South America, earnings improved thanks to the successful business with crop protection products.

Taking into account the economic risks, Bock stated: "We remain cautious despite the current good performance as economic growth is likely to slow further. In particular, credit restrictions in China, as well as the debt crises in Europe and the United States will adversely impact economic growth. We remain committed to further reducing costs and increasing efficiency. At the same time, we are concentrating on product innovations and the expansion of our business in emerging markets."

Outlook for full year 2011

The expectations for growth in the global economy in 2011 today are just under one percentage point lower than three months ago (previous assumptions in parentheses):

Growth of gross domestic product: 2.5% - 3% (3% - 4%)
Growth in industrial production: 4.5% - 5% (5% - 6%)
Growth in chemical production (excluding pharmaceuticals):
4.5% - 5% (5% - 6%)
An average euro/dollar exchange rate of $1.40 per euro
An average oil price of $110 per barrel in 2011

Despite the overall reduced oil production, the company expects significant sales growth for BASF Group in 2011. BASF expects that the non-compensable income taxes on oil-producing operations reported in EBIT will be around euro 700 million lower in 2011 (2010: euro 983 million). Adjusted for the non-compensable income taxes on oil-producing operations, BASF continues to aim to significantly exceed the record 2010 level in EBIT before special items. "We will earn a high premium on our cost of capital once again in 2011," said Engel.

BASF – The Chemical Company

BASF Corporation, headquartered in Florham Park, New Jersey, is the North American affiliate of BASF SE, Ludwigshafen, Germany. BASF has approximately 16,400 employees in North America, and had sales of $18 billion in 2010. For more information about BASF's North American operations, visit www.basf.us.

BASF is the world's leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and agricultural products to oil and gas. As a reliable partner BASF creates chemistry to help its customers in virtually all industries to be more successful. With its high-value products and intelligent solutions, BASF plays an important role in finding answers to global challenges such as climate protection, energy efficiency, nutrition and mobility. BASF posted sales of about euro 63.9 billion in 2010 and had approximately 109,000 employees as of the end of the year. Further information on BASF is available on the Internet at www.basf.com or in its Social Media Newsroom at newsroom.basf.com.

Forward-looking statements

This release contains forward-looking statements based on current experience, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. BASF does not assume any obligation to update the forward-looking statements contained in this release.

SOURCE BASF