BASF sales slump by 29%
In the first quarter of 2016, BASF Group sales decreased by 29% to EUR14.2 billion compared with the same quarter of the previous year.
This was largely on account of the divestiture of the gas trading and storage business, which had contributed EUR4.2 billion to sales in the first quarter of 2015.
Lower oil price led to declining sales prices
The lower price of oil led to declining sales prices, especially in the Chemicals segment. Overall sales volumes matched the level of the previous first quarter. Volumes increased slightly in the Functional Materials & Solutions, Oil & Gas and Performance Products segments, whereas they decreased slightly in the Agricultural Solutions and Chemicals segments.
“We were able to slightly increase EBIT before special items in the Performance Products, Functional Materials & Solutions and Agricultural Solutions segments,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors, at the Annual Shareholders’ Meeting of BASF SE in the Congress Center Rosengarten in Mannheim, Germany. The significantly smaller contributions from the Oil & Gas and Chemicals segments reduced income from operations (EBIT) before special items by EUR164 million to EUR1.9 billion. A considerable earnings improvement in Other was especially the result of valuation effects for the long-term incentive program.
Compared with the previous first quarter, EBIT declined by EUR129 million to EUR1.9 billion. EBITDA fell by EUR78 million to EUR2.8 billion. At minus EUR188 million, the financial result was below the level of the first quarter of 2015 (minus EUR164 million).
Outlook for 2016 confirmed
For 2016, BASF anticipates a continuation of the currently challenging conditions along with substantial risks. The expectations for the global economic environment in 2016 remain unchanged:
- Growth of gross domestic product: 2.3%
- Growth in global industrial production: 2.0%
- Growth in chemical production: 3.4%
- An average euro/dollar exchange rate of $1.10 per euro
- An average Brent blend oil price for the year of $40 per barrel
Bock: “We confirm our outlook for the full year: We aim to increase sales volumes in all segments. BASF Group sales will decline considerably, however, especially as a result of the divestiture of the gas trading and storage business as well as lower oil and gas prices. We expect EBIT before special items to be slightly below 2015 levels. This is an ambitious goal in the current volatile and challenging environment, and is particularly dependent on oil price developments.”
Focusing on high-growth businesses
“We will continue to refine our portfolio in 2016. Our goal is to concentrate on high-growth businesses,” said Bock. At the end of February, BASF reached an agreement with AkzoNobel to sell its industrial coatings business. This will enable BASF to focus even more on its core business with automotive coatings. In April, an agreement was signed to acquire the automotive refinishing business from Guangdong Yinfan Chemistry Co. Ltd., in China. The acquisition strengthens BASF’s position in the rapidly growing market for refinish coatings in China. Last week, BASF agreed to sell its polyolefin catalysts business to the U.S. company W.R. Grace & Co. With this divestiture, BASF will continue to sharpen its focus in the area of process catalysts on key growth areas, including the chemical catalysts and refinery catalysts businesses.
Business development in the segments
Sales fell by 19% to EUR3.1 billion in the Chemicals segment, predominantly as a result of price drops brought about by the decline in raw material prices. Sales volumes decreased particularly in the Petrochemicals division in North America. At EUR465 million, EBIT before special items was down by EUR261 million compared with the first quarter of 2015, which had been marked by high margins. In addition to lower margins, this reduction was also attributable to increased fixed costs arising primarily from the startup of new plants in 2015.
Despite higher volumes, sales in the Performance Products segment were EUR3.8 billion, which was 6% below the level of the previous first quarter, largely on account of lower sales prices. The main factor here was the oil-price-related decline in raw material costs, although ongoing pressure on prices in the hygiene business was additionally responsible. Thanks to reduced fixed costs and higher volumes, EBIT before special items rose by EUR32 million to EUR547 million.#
Sales in the Functional Materials & Solutions segment declined by 4% to EUR4.4 billion, mainly due to falling sales prices as a particular result of lower prices in precious metal trading. Sales volumes increased, particularly as a result of higher demand from the automotive and construction industries. Thanks to improved contributions from the Performance Materials and Construction Chemicals divisions, EBIT before special items grew by EUR25 million to EUR456 million.
