BASF SE, the world’s largest chemical maker, reported lower-than-estimated profit and sales and cut its targets for this year amid a slump in oil prices.
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Further, BASF said that contrary to expectations, EBIT before special items in 2015 will probably not match the previous year’s level but will instead see a slight decrease. BASF had targeted a “slight increase” in sales and EBIT before special items to stay flat from a year earlier. Analysts had predicted 18.3 billion euros, according to a Bloomberg survey.
“We experienced a pronounced summer lull and, more importantly, no volume momentum in September”, said Chief Executive Kurt Bock. “Major markets like Brazil are in a recession or face lower growth rates, such as China”, said Bock.
The firm drastically lowered its expectations for year-on-year global industrial production growth in 2015, to 2% from earlier forecasts of 2.9%, while chemicals production growth forecasts were revised down from 3.8% to 3.5%.
Low commodities prices particularly hurt BASF’s Oil & Gas division, where sales were down 2 percent, as well as the Chemicals segment, which suffered a steep year-on-year drop of 13 percent to 3.6 billion euros.
Net income was one of the report’s few other bright spots, beating expectations as the group’s bottom line shot up 19 percent to 1.2 billion euros compared to the previous third quarter.
Profit was hurt by lower volumes in the pigments business, weak demand for oil field chemicals and tough competition in vitamins, among other factors. In contrast, income from operations (EBIT) before special items dropped by €171m to €1.6bn.
In September, BASF announced it had agreed with Russian gas behemoth Gazprom to go ahead with an asset swap the two had put on ice due to tensions between Russia and the West.
EBIT before special items at the Performance Products unit, which manufactures paper chemicals, plastic additives and leather chemicals, fell 15% to EUR319 million because of higher fixed costs from the startup of new plants and unfavorable currency effects.
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“Besides weaker economic development, the oil price fell further than expected”. BASF now expects sales to decline slightly.
