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BASF Q2 Sales Up 6% Despite Weaker-than-expected Chemical Demand
Posted: July 27, 2012
BASF's (Ludwigshafen, Germany) second-quarter sales grew 6% to €19.5 billion as strength in its agriculture, oil and gas business offset weaker-than-expected chemical demand in developed and emerging markets.
However, the chemical giant—a bellwether for numerous industries worldwide—expressed caution in its 2012 macroeconomic assumptions due to the languishing global economy.
For the full year 2012, BASF still expects earnings before interest and taxes (before special items) and sales to exceed year-earlier results. "However, the recent weakening of the global economy, which we see reflected in our order book, led us to become more cautious in our 2012 macroeconomic assumptions," Kurt Bock, BASF chairman, said during the company's quarterly conference call.
BASF now expects global GDP to expand only by 2.3% for 2012, which is down 0.4 percentage points from a previous outlook. Industrial production is pegged at 3.4% and chemical production at 3.5%, a reduction of 0.7 and 0.6 percentage points, respectively.
On the call, Bock noted growing chemical demand in the US, but a weak market in Europe and a "severe" slowdown in Asia. During the recent quarter, there was weakness in the care chemicals business for surfactant and fatty alcohols, which are mostly commoditized products, he said. Sales volume in care chemicals declined as lower raw material prices triggered cautious behavior and order delays. For instance, lauric oil prices, according to Bock, have been volatile and have fallen to less than half of the ingredient's record price in 2011.
"There were a couple of businesses where we basically said: 'We will not compete based on that price,' " Bock said on the call. What is most important, he added, is that the underlying trend for the business is a very healthy one.
BASF posted earnings before interest, taxes, depreciation and amortization, or EBITDA, of €3.1 billion during the second quarter, up 4% from the year-ago quarter. EBIT (excluding special items) came in at €2.5 billion.