Thursday November 20
BASF Net Profit Down, Sales Up in Q3Germany's BASF AG has reported that the company's net profit in the third quarter halved from the year-ago period, but signaled that long-depressed market conditions may be nearing an end. Sales increased slightly despite negative currency effects, and EBIT before special items was below the previous year's good level.
In a business environment characterized by high raw material prices, margin pressure and a weak U.S. dollar, BASF Aktiengesellschaft increased its sales in the third quarter of 2003 by 2.1 percent to EUR7.7 billion compared with the same period in 2002. Excluding negative currency translation effects, sales increased by 7.6 percent. Price increases contributed 2.1 percent to sales, but prices still remain at an unsatisfactory level. Sales volumes were up 4.5 percent.
"The latest figures for our ongoing business give grounds for hope that we have now reached the bottom of the downturn. However, there has still not yet been a real breakthrough. 2003 remains a difficult year, as demonstrated by the weak third quarter," said Dr. Jurgen Hambrecht, Chairman of the Board of Executive Directors of BASF Aktiengesellschaft.
Third-quarter income from operations (EBIT) before special items fell 31.8 percent to EUR403 million compared with 2002. This unsatisfactory operating result is due mainly to continuing pressure on margins in the Chemicals, Plastics and Performance Products segments. High oil prices kept purchasing prices for naphtha and natural gas high. BASF's chemicals operations remain burdened by overcapacities, especially in the United States and in Europe. Prices could therefore not be increased to the extent necessary.
EBIT after special items declined 20 percent to EUR374 million. Special charges related mainly to restructuring measures in the NAFTA region and integration costs for the crop protection business acquired by BASF.
Net income in the third quarter fell 51 percent to EUR120 million. In the third quarter of 2002, the financial result contained tax-free gains from the sale of marketable securities. The absence of these tax-free gains in 2003 led to a significant increase in the tax rate compared with the previous year.
Third-quarter earnings per share were EUR0.21 compared with EUR0.43 in 2002.
In the first nine months of 2003, BASF posted cumulative sales of EUR24.8 billion - slightly more than in the same period in 2002. Excluding currency effects, sales would have amounted to EUR26.7 billion, 10.2 percent more than in 2002. At EUR2.2 billion, EBIT before special items in the first nine months was 2.3 percent lower than in 2002. An indicator of financial strength for BASF is that, at just over EUR3.5 billion, the cash provided by operating activities for the first three quarters was already significantly higher than the full-year value for 2002 of EUR2.3 billion. The outlook for full-year EBIT before special items is, however,lower than in 2002.
"In the summer, it was already clear that major efforts would be needed to match the previous year's earnings level. But our own efforts are not enough if there is not a sustainable improvement in the economic climate. We saw no signs of such an improvement in the third quarter," said Hambrecht. "Although there are currently initial signs of an economic recovery, high raw material costs, unsatisfactory margins in some areas of our chemicals businesses and the weak U.S. dollar will continue to put pressure on our business in the fourth quarter," he continued.
Hambrecht concluded, "Even though more and more indicators are positive and pointing upward, we have to rely on facts rather than moods."
He therefore stated that it is too soon to be able to predict when an economic recovery will set in, how strong it will be and how long it will last.
BASF will continue to focus on its extensive Group-wide programs and initiatives to optimize its portfolio, reduce costs and restructure its organization.
©2003 Collision Repair Industry INSIGHT