BASF’s 2Q net profit narrows to €343 million
BERLIN — German chemical company BASF SE warned of a significant drop in sales and earnings this year and said its second-quarter net profit plummeted nearly 74 percent to €373 million ($526.1 million). The recession cut into sales and its acquisition of specialty chemicals firm Ciba also hit profits.
Ludwigshafen-based BASF, the world’s largest chemical company by sales, said Thursday that its net profit in the April-June period compared with €1.3 billion 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 in the quarter compared with €16.3 billion a year earlier.
BASF shares closed down 1.8 percent at €34.20 in Frankfurt.
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 to €3.6 billion.
“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.
BASF plans to cut 3,700 jobs globally by 2013 as it integrates Ciba, a process the company hopes to have completed by the first quarter of 2010.
BASF said second quarter agriculture product sales improved 1 percent to nearly €1.2 billion in part because of higher prices in North America and Europe.
BASF, which also explores for and refines oil and natural gas products, said its oil and gas segment sales fell 23 percent to nearly €2.5 billion because of falling energy prices, while the division’s pretax profit was halved to €506 million.
The company said the chemicals division’s sales decreased 41 percent to €1.8 billion because of lower volumes and prices — but the unit still made a pretax profit €258 million.
The company’s plastics division saw sales drop 30 percent to €1.75 billion and reported a €138 million pretax profit — a development BASF blamed on weak demand from “almost all customer industries.”
For the first six months, the company’s net profit fell 68 percent to €1.4 billion compared with €4.5 billion in 2008 as sales fell 23.3 percent to €24.7 billion from €32.2 billion.
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