BASF Increases Sales and Earnings in 3rd Quarter
Despite declining demand, BASF SE, Ludwigshafen, Germany, increases sales and earnings in the third quarter of 2014. Sales of BASF Group grew by 3% compared with the previous third quarter, reaching EUR 18.3 billion. A sharp rise in volumes in the Natural Gas Trading business sector was mainly responsible for this growth. Income from operations (EBIT) before special items increased by EUR150 million to around EUR 1.8 billion. The primary contributors to this development were the Chemicals and Oil & Gas segments, together with Other. The increase was dampened by a considerable earnings decline in the Agricultural Solutions segment.
“The economic environment remained challenging in the third quarter of 2014. Geopolitical tensions and increasing uncertainty about the global economic development significantly dampened demand for chemical products," explained Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE.
Sales in the Chemicals segment matched the level of the previous third quarter. The market environment in Asia was difficult; in Europe sales volumes declined. There was sharp volumes growth in the Petrochemicals division in North America. With EUR 616 million, earnings in the segment exceeded the prior third-quarter level by EUR 89 million, mainly due to higher margins in the Petrochemicals division.
Sales reached the level of the previous third quarter in the Performance Products segment. Volumes and sales prices remained stable while currency effects were negative. Volumes increased significantly in the Performance Chemicals division. Earnings of EUR 376 million matched the level of the previous third quarter.
In the Functional Materials & Solutions segment, sales exceeded the level of the third quarter of 2013 by 2%. Prices could be raised in most business areas, more than compensating for negative currency effects. Demand remained strong from the automotive industry, especially in the Catalysts division. Earnings increased by EUR 10 million to EUR 310 million, mostly through considerably higher contributions from the Coatings and Catalysts divisions.
For the fourth quarter of 2014, BASF does not anticipate an upturn in demand. Consequently, the company has adjusted its expectations for the global economy in 2014. From today’s point of view, BASF will not achieve its ambitious financial targets for 2015 (sales: EUR 80 billion; EBITDA: EUR 14 billion). The growth rates for gross domestic product, industry and chemical production for 2010 to 2015 are lower than originally expected:
- BASF now expects the average annual growth of global gross domestic product to be about 0.8 percentage points lower (prior assumption: 3.4% p.a., current assumption: 2.6% p.a.).
- Growth of industrial production is now assumed to be 3.4% p.a., versus a previous assumption of 4.6% p.a.
- The company now assumes the growth of chemical production to be 4.0% p.a. instead of 4.9% p.a. – still growing well above GDP and industrial production.
In 2020, BASF aims to generate EUR 30 billion of sales with products that will have been on the market for less than 10 years. The basis for these innovations is effective and efficient research and development. To achieve this ambitious goal, BASF is further developing the research organization and bundling its competencies in three global platforms:
- Advanced Materials & Systems Research with headquarters at BASF’s Innovation Campus Asia Pacific in Shanghai by 2016.
- Bioscience Resarch eheadquartered in Research Triangle Park, North Carolina, starting January 2015.
- Process Research & Chemical Engineering headquartered in Ludwigshafen.
The stronger presence outside of Europe will create new opportunities for building up and expanding customer relationships and scientific cooperations. All three research platforms will be established globally to support the R&D needs of BASF’s customers.
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