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BASF 2012 Sales Up 7%; Net Income Slips Amid Higher Taxes

Posted: February 26, 2013

Global industry bellwether BASF's full-year 2012 total sales rose 7%, although net income fell amid higher taxes. Meanwhile, growth in worldwide chemical production excluding pharmaceuticals slowed and sales in its care chemicals division slipped 4.2%. 

Still, the company expects global chemical production excluding pharmaceuticals to recover in 2013, putting it back on the growth track expected for the medium term. 

BASF said its fourth-quarter total sales were €19.6 billion, 9% higher than a year ago, mainly due to higher volumes in almost all segments as well as price and currency effects. In chemicals, fourth-quarter sales increased, equally driven by price and portfolio effects. 

For the full year, BASF's net income fell by €1.3 billion to €4.9 billion, due in part to the higher earnings contribution from oil and gas and as a result, significantly higher taxes. However, full-year total sales rose to €78.7 billion, up 7% from a year ago.

For the chemical industry, BASF said 2012 was a mixed year: growth in worldwide chemical production excluding pharmaceuticals slowed to 2.6% compared to 3.8% in 2011 and the upswing in demand expected for the second half of the year did not appear. The emerging markets of Asia showed markedly weak growth in the first half of the year. At the same time, raw material costs were higher than in the previous year. 

Chemical production in Asia (excluding Japan) posted weaker growth, up 7.7% compared to a 9% rise in 2011. Production rose 10.6% in China, the world’s largest chemicals market; in India, it grew by only 1.3%. In Japan, the chemical industry was unable to benefit as anticipated from reconstruction after the natural disaster in 2011; production declined by 4.5%. Chemical production growth of 1.9% in South America was weaker than in the past years. In Brazil, production grew by only 1.4% due to slow growth in customer industries. In the U.S., chemical production rose by 2.5%, although chemical production in the E.U. fell 1.4%. 

In BASF's performance products unit, care chemicals represents the division’s largest component of sales, which includes products for hygiene and personal care and other industrial cleaning products. Care chemical 2012 sales slipped 4.2% to €4.96 billion. Meanwhile, nutrition and health sales rose 5.2% to €1.96 billion for the year. 

Still, the company expects global chemical production, excluding pharmaceuticals, to recover in 2013, up 3.6%, putting it back on the growth track expected for the medium term, amid strong growth in the emerging markets, up a projected 6.8%.

For 2013, BASF says the global economy is likely to grow at a rate of 2.4% in 2013, slightly faster than 2.2% in 2012.

"However, we continue to expect a volatile environment," the company said in a written statement. "Austerity measures to improve public finances will continue to dampen demand in the eurozone and the United States." 

BASF’s outlook for 2013 is based on the following economic conditions: an average euro/dollar exchange rate of $1.30 per euro and an average oil price of $110/barrel.

The company assumes that gross domestic product will grow by 1.8% in the U.S. in 2013, roughly the same rate as in the previous year. Economic growth in Asia, excluding Japan, is expected to gain some momentum in 2013 (up 6.5%) while the E.U. is expected to see slight growth (up 0.3%). BASF expects South America to significantly accelerate in 2013 (up 3.7%) while growth in Japan is forecast to once again stabilize in 2013 (up 1%), partly as a result of economic stimulus measures from the government.

For the company's health and nutrition segment, in particular, BASF anticipates robust growth in 2013, somewhat higher than in the previous year.