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BASF's Chairman: Growth in Global Economy is Slower Than Expected
LUDWIGSHAFEN, Germany -- In light of continuing high raw material prices, weaker signs of growth in
Europe, and no indication of an economic upturn in the United States, BASF is
not expecting an increase in income from operations in the second quarter.
"Nevertheless, we remain committed to our ambitious, medium-term goal and
want to increase our income from operations before special items by an average
of at least 10 percent for the years 2000 to 2002," said Dr. Jurgen F. Strube,
Chairman of BASF's Board of Directors, at a meeting of the company's executive
managers. "We will only achieve this goal through extraordinary efforts," he
added. Strube called for the company's managers to more quickly transform
innovation and investment into market success and to rapidly implement the
action plan which the Board of Executive Directors has established.
These measures include:
- The current capital expenditure program will be reduced by a fifth. In the
medium-term, capital expenditures will be reduced to the level of
- Globally, 10 sites and an additional 14 plants will be closed and thus
production capacities will be taken off the market.
- The further development of the global organizational structure under the
"Fit For the Future" program will be implemented at an accelerated rate.
"With these measures, we are adapting our business to the substantially
slower economic growth worldwide," said Strube and referred to the current
positive and negative influences on the company's business. In the course of the
second quarter of 2001, the following factors negatively affected business:
- The signs of growth in Europe, especially in Germany, did not strengthen,
but rather became weaker. There were also no indications of an economic upturn
in the United States in the second quarter. This is increasingly having an
effect on economic growth in Asia.
- Some of BASF's new production plants in Asia and Germany are going on
stream with delays and therefore have not yet contributed to earnings.
- The loss of production in the superabsorbents plant in Birkenhead, United
Kingdom, has reduced income.
- The unexpected further increase in raw material prices cannot yet be fully
compensated for by price increases to the extent necessary.
- Many customer expect the oil price to fall and thus have been reducing
their inventory and are being cautious with their purchasing.
- BASF's continuing capital expenditure program in the United States is
especially burdening earnings in the current weak economic environment.
However, BASF remains optimistic, pointing out that there are also a number of favorable factors which are expected to positively
influence BASF's business, pointing out:
- BASF is better positioned regionally than many of its competitors and
benefits from the advantages resulting from its extensive Verbund structure.
- Its balanced portfolio allows BASF to benefit especially in times of a
high oil price from additional earnings from its oil and natural gas business.
- In the United States, the lowering of interest rates and tax cuts support
the expectation that the economy will revive at the end of the year.
- The company has achieved rapid market success with innovative products
such as the crop protection system Clearfield® and the new class of thermal
insulation called Neopor®.
- Through the worldwide restructuring of its internal organization, BASF
expects annual cost advantages of about Euro 400 million worldwide.
"We know we can count on our executives and employees to rise to the
challenges of the difficult environment. This has been demonstrated by the
successful integration of the crop protection business acquired from American
Home Products last year. We will therefore also be able to maintain our position
as a leading chemical company, even in a period of slower economic growth,"
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