Ludwigshafen, Germany
August 2, 2006
Deutsche Version:
BASF mit Dynamik auf profitablem Wachstumskurs
- Strong volume demand:
Sales rise to €12.3 billion (up 16%)
- EBIT before special items
of €1.9 billion (up 15%)
- Integration of new
businesses proceeds smoothly
- Challenging business
environment for Agricultural Products & Nutrition
- Optimistic outlook for
2006: Sales and earnings above previous year’s strong level
BASF
– The Chemical Company has completed the first half of 2006
with record results, and again exceeded the previous year’s very
strong results.
- Second-quarter sales
climbed 16 percent to €12.3 billion and income from
operations (EBIT) before special items rose 15 percent
to €1.9 billion.
- Cumulative sales in
the first half of 2006 amounted to almost €25 billion,
or 20 percent more than in the same period of the
previous year. Compared with the first six months of
2005, BASF increased EBIT before special items by 17
percent to approximately €3.8 billion.
At the same time, BASF reached
important milestones on its path to profitable growth in the
first six months. Key events were the purchase of Degussa’s
construction chemicals business, the takeover of Engelhard
Corporation and the acquisition of Johnson Polymer and
CropDesign. “These portfolio expansions are important elements
of our strategy of making BASF even more resilient to
cyclicality. The integration of the new businesses is proceeding
smoothly,” said Dr. Jürgen Hambrecht, Chairman of the Board of
Executive Directors of BASF Aktiengesellschaft, in his
presentation of BASF’s results for the second quarter and first
half of 2006.
The business environment was
favorable for BASF in the first half. The economic situation has
improved, and the outlook seems positive. Asia is growing
rapidly, especially China, India and Korea. The economic climate
is stable in the United States, and domestic demand is on the
upturn in Europe, and, in the meantime, in Germany. There are
virtually no signs of the usual summer lull. Volume demand for
BASF’s products remained strong.
Risks, however, remain in the form
of persistently high oil prices, and geopolitical tensions – in
particular in the Middle East – are making the markets jittery.
Record costs for raw materials have further increased the
pressure on the company’s margins. Sales prices increases were
therefore necessary in many product lines. Price increases to
reflect rising costs will also be necessary in the future.
To further improve its market
position, BASF will continue to optimize its portfolio,
strengthen its service offering with innovations and continue
with its restructuring and cost reduction measures worldwide.
BASF reiterates its optimistic
outlook for full year 2006
Hambrecht expects the economic
situation to continue to develop positively. In the chemical
industry, he anticipates global growth of more than 3 percent,
although this will differ considerably from region to region.
Hambrecht’s goal is for BASF to grow faster than the market. For
the full year, BASF expects an average euro/dollar exchange rate
of $1.25 per euro. As a result of persistently high and
increased crude oil prices, the company has increased its
forecast for the annual average to $65 per barrel of Brent
crude.
“In view of the strong business
performance in the first half of 2006, we remain optimistic for
the full year: We expect to post significantly higher sales and
higher EBIT before special items compared with the previous
year’s strong level,” said Hambrecht.
“Furthermore, our acquisitions
will contribute to sales in the second half, bringing total
sales to considerably more than €50 billion. We anticipate an
additional contribution to EBIT before special items,” he
continued.
Balance sheet remains healthy
following acquisitions
Chief Financial Officer Dr. Kurt Bock pointed out that rating
agencies had confirmed BASF’s excellent credit ratings despite
the fact that financial indebtedness had risen to €11 billion as
a result of the acquisitions. “Our equity ratio is still
extremely high for this industry at just under 40 percent.” Cash
provided by operating activities rose further to more than €2.2
billion in the first half.
In the first six months of 2006,
BASF bought back shares for a total of €681 million or an
average price of €63.04 per share. Of this amount, €342 million
was used to buy back shares under the €500 million program that
was announced in February 2006 and is scheduled to run until the
Annual Meeting in 2007. As a result, BASF has bought back
approximately 21.5 percent of its shares since starting its
share buyback program in 1999. “We also plan to buy back shares
in the future,” said Bock.
Segment: Volume demand remains
strong
In the Chemicals segment, BASF
increased sales by 22 percent. This sales growth was due
primarily to higher volumes, the additional business from the
new Catalysts division and new plants in Nanjing, China. EBIT
before special items declined by 15 percent due to high margin
pressure as a result of significantly higher prices for raw
materials, as well as turnarounds and outages at important
plants.
Sales in the Plastics segment
increased by 8 percent thanks to higher volumes, in particular
for styrenics and polyurethanes. Earnings rose 15 percent.
In the Performance Products
segment, all divisions contributed to sales growth of 5 percent.
High margin pressure and rising raw material costs led to a 23
percent decline in earnings compared with the very strong second
quarter of 2005.
Sales and earnings declined in the
Agricultural Products & Nutrition segment. Lower sales in the
Agricultural Products business were caused by lower volumes and
the sale of major parts of the generics business in North
America. In the United States, demand for fungicides was
severely impaired by climatic conditions in the course of 2006
to date. The appreciation of the Brazilian real contributed to
the decline in earnings in South America.
In the Fine Chemicals division,
BASF increased sales and earnings due to strong business with
aroma chemicals and as a result of the contract manufacturing
and personal care acquisitions. Overcapacities and high raw
material costs continue to put pressure on margins for lysine
and vitamin C. The division’s earnings rose, thanks also to
continued cost reduction measures.
Sales and earnings in the Oil &
Gas segment climbed 50 percent due to persistently high
crude oil prices and considerably higher sales volumes in the
natural gas trading business.
Sales growth in all regions
The strongest impulses for growth
in the second quarter came from Europe and Asia, where sales by
location of company rose by double-digit amounts.
In Europe, second-quarter
sales by location of company totaled €7.5 billion. This
corresponds to an increase of 21 percent compared with the same
period of 2005. EBIT before special items in this region rose by
26 percent, due above all to the contribution of the Oil & Gas
segment.
Sales in North America
(NAFTA) rose by more than 5 percent. This sales growth was due
primarily to the acquisition of Engelhard Corporation and higher
sales volumes in the Polyurethanes division.
EBIT before special items declined
by 25 percent to €263 million. Among other things, this was due
to the planned turnaround of the steam cracker in Port Arthur,
Texas, and lower sales volumes of agricultural products.
The Asia Pacific region
remains the growth market, and sales climbed by 18 percent. The
company’s new Verbund site in Nanjing, China, made a significant
contribution to this sales growth. A few weeks ago, BASF signed
a $500 million agreement with its partner Sinopec to invest in
further downstream plants and expand the capacity of the steam
cracker. EBIT before special items in Asia Pacific rose by 32
percent to €125 million.
In South America, Africa,
Middle East, sales by location of company increased by 8
percent. EBIT before special items was negatively impacted by
higher costs associated with the significant revaluation of the
Brazilian real.
BASF is the world’s leading
chemical company: The Chemical Company. Its portfolio ranges
from chemicals, plastics, performance products, agricultural
products and fine chemicals to crude oil and natural gas. As a
reliable partner to virtually all industries, BASF’s intelligent
system solutions and high-value products help its customers to
be more successful. BASF develops new technologies and uses them
to open up additional market opportunities. It combines economic
success with environmental protection and social responsibility,
thus contributing to a better future. BASF has approximately
94,000 employees and posted sales of more than €42.7 billion in
2005. BASF shares are traded on the stock exchanges in Frankfurt
(BAS), London (BFA), New York (BF) and Zurich (AN).
Second quarter results:
http://www.seedquest.com/News/releases/2006/pdf/16494.pdf
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