BASF provides business figures for the fiscal year 2016

As expected, earnings in Oil & Gas did not match the previous year’s level.

Increased sales volumes in Asia

“As the year progressed, we were able to increase BASF’s growth. Our sales volumes rose from quarter to quarter. Particularly in Asia, we continually increased our sales volumes in the chemicals business. This shows that the high investments we made in research and development and new production capacity in recent years are paying off,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE, at the Annual Press Conference in Ludwigshafen.

Fourth quarter: sales increased by 7%

In the fourth quarter of 2016, sales increased by 7% to EUR14.8 billion compared with the same quarter of 2015, mainly due to higher volumes. For BASF Group, as well as the chemicals business, which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments, volumes rose by 6%. Income from operations (EBIT) before special items was EUR1.2 billion, EUR157 million higher than in the prior-year quarter. Considerably higher earnings in Chemicals, Functional Materials & Solutions and Oil & Gas more than compensated for lower earnings in Agricultural Solutions and Other.

Decrease in sales in the full year 2016

For the full year 2016, sales decreased by 18% to EUR57.6 billion. This was mainly due to the divestiture of the gas trading and storage business as part of the asset swap with Gazprom at the end of September 2015. This business had contributed EUR10.1 billion to sales in 2015. In total, portfolio effects lowered sales by 15%. In addition, lower raw material prices led to a drop in sales prices (minus 4%). The company was able to continually raise sales volumes over the course of the year. Compared with the previous year, volumes increased by 2%, and in the chemicals business, by 4%. Currency effects slightly dampened sales (minus 1%).

EBIT before special items is EUR430 million

At EUR6.3 billion, EBIT before special items was EUR430 million below the prior-year level. This was largely a consequence of a decline of about EUR850 million in the Oil & Gas segment, mainly resulting from falling prices and the divestiture of the natural gas trading and storage business. The activities transferred to Gazprom had contributed around EUR260 million to EBIT before special items in 2015. In the Agricultural Solutions segment, EBIT before special items matched the previous year’s level. The chemicals business increased earnings considerably thanks to sharply improved contributions from the Performance Products and Functional Materials & Solutions segments.

Cautious optimismus for 2017

Bock: “We are cautiously optimistic for 2017. We want to grow further, with all segments contributing to this growth. More importantly: We want to increase our earnings again, also in the oil and gas business. The global economy will presumably grow about as fast as in 2016. In light of significant political uncertainty, volatility will remain high.” A considerable slowdown in growth in the European Union is expected. For the United States, a slight upturn in growth is anticipated. Growth in China is likely to continue to slow further. And it is expected that the recession in Brazil and Russia will end.

Sales are expected to grow

In 2017, BASF Group sales are expected to grow considerably. This will be supported by slightly higher sales in the Performance Products segment and by considerable increases in the remaining segments as well as in Other. Bock: “We want to slightly raise EBIT before special items compared with 2016. We anticipate considerably higher contributions from the Oil & Gas segment. In the Performance Products, Functional Materials & Solutions and Agricultural Solutions segments, we assume EBIT before special items will be slightly higher, while the contribution from the Chemicals segment will match the prior-year level.”

Scaling back investments

After a phase of high investments, BASF scaled these back in 2016 by more than EUR1 billion as previously announced. The company invested a total of EUR3.9 billion in capital expenditures (excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments). “In the coming years, we plan to invest at a comparable level. We are now filling the existing capacity in our new plants and thus building on the volume momentum seen last year,” said Bock.

Development of the segments

In the Chemicals segment, fourth-quarter sales increased by 12% to EUR3.6 billion, driven by higher volumes and prices. EBIT before special items rose by EUR386 million to EUR635 million. This was mainly due to higher margins, especially in isocyanates and cracker products. For the full year, sales decreased by 8% to EUR13.5 billion. This was attributable to lower prices as a result of a decline in raw material prices, especially in the Petrochemicals division. Higher volumes could not compensate for this. EBIT before special items fell by EUR92 million to EUR2.1 billion, mainly because of higher fixed costs from new production plant startups. Lower margins in the Petrochemicals and Intermediates divisions also dampened EBIT before special items. Higher margins for isocyanates in the Monomers division helped slow the decline.

In the Performance Products segment, sales in the fourth quarter declined by 1% to EUR3.6 billion. EBIT before special items rose slightly to EUR231 million supported by improved margins. At EUR15.0 billion, full-year sales were 4% below the level of the previous year. This was primarily attributable to falling sales prices and the divestitures completed in 2015. EBIT before special items increased by EUR379 million to EUR1.7 billion. This was mostly due to significantly reduced fixed costs thanks to restructuring measures and strict fixed cost management, in addition to improved margins.

In the Functional Materials & Solutions segment, fourth-quarter sales grew by 10% to EUR5.0 billion driven by higher volumes. EBIT before special items increased by EUR69 million to EUR458 million due to volumes growth, a favorable product mix and continued cost discipline. Sales for the full year increased by 1% to EUR18.7 billion. By increasing volumes in all divisions, lower prices and mildly negative currency effects could be more than compensated for. The volumes growth was mainly attributable to higher demand for products for the automotive industry. Business with the construction industry saw sales volumes at a high level overall. EBIT before special items rose by EUR297 million to EUR1.9 billion compared with 2015. All divisions contributed to this considerable earnings increase, particularly the Performance Materials division.