Earnings and volumes increase in chemicals business
Sales at €14.0 billion (minus 20%)
Good volumes growth, lower prices, significantly negative portfolio effects
EBIT before special items at €1.5 billion (minus 5%)
Earnings rise in chemicals business due to considerable growth in Performance Products and Functional Materials & Solutions segments
Outlook 2016 confirmed:
- Considerable sales decline due to divestiture of gas trading business
- EBIT before special items expected at level slightly below 2015
In the third quarter of 2016, BASF increased its earnings and volumes in the chemicals business. “Demand from the automotive and construction industries in particular remained robust worldwide. In Europe, we saw moderate growth across all sectors. The summer lull in July and August was less pronounced than in prior years. In Asia, the upward trend continued in the third quarter. Growth in China was slightly higher than we had expected at the beginning of the year. Demand in North America developed modestly; however, we experienced continued positive momentum in the automotive and construction industries. Economic development in South America remained weak and business confidence low. Volumes decreased, especially in Brazil, our largest market in the region,” said Dr. Hans-Ulrich Engel, Chief Financial Officer of BASF SE.
The BASF Group’s sales decreased by 20% in the third quarter of 2016 to €14.0 billion, mainly as a result of 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 €2.9 billion to sales in the third quarter of 2015. Portfolio effects were, in total, responsible for 18 percentage points of the decline in sales. Moreover, sales prices were reduced (minus 5%) by lower raw material prices. The volumes increase (plus 4%) was primarily supported by the Functional Materials & Solutions and Chemicals segments.
Income from operations (EBIT) before special items declined by €87 million to €1.5 billion, primarily as a result of smaller contributions from the Oil & Gas segment and from Other. In the chemicals business and the Agricultural Solutions segment, however, EBIT before special items increased.
Net income fell from €1.2 billion to €888 million. Earnings per share were €0.97 in the third quarter of 2016, compared with €1.31 in the same quarter of 2015. Adjusted for special items and amortization of intangible assets, earnings per share amounted to €1.10 (third quarter of 2015: €1.07).
Outlook for 2016
BASF’s expectations for the global economic environment in 2016 have only been adjusted in terms of the oil price (previous forecast in parentheses):
- Growth in gross domestic product: 2.3% (2.3%)
- Growth in industrial production: 2.0% (2.0%)
- Growth in chemical production: 3.4% (3.4%)
- Average euro/dollar exchange rate: $1.10 per euro ($1.10 per euro)
- Annualized average price of a barrel of oil: $45 ($40 per barrel)
BASF assumes that the logistic and supply bottlenecks resulting from the fire at the North Harbor in Ludwigshafen will negatively impact earnings for the business year. They have not, however, resulted in a change in the BASF Group outlook for 2016.
The company confirms its forecast for sales and EBIT before special items of the BASF Group: Sales will decrease considerably in 2016. As a consequence of the asset swap with Gazprom, contributions to the Oil & Gas segment ceased from the gas trading and storage business in particular. In the first three quarters of 2015, these activities had contributed a total of around €10.1 billion to sales. Sales will be furthermore reduced by lower prices for oil and gas. BASF wants to increase sales volumes, excluding the effects of acquisitions and divestitures.
“We continue to expect EBIT before special items to be slightly below the level of 2015. This remains an ambitious goal in the current volatile and challenging environment, and in light of the fire of October 17 and its consequences,” said Engel.
Forward-looking statements and forecasts
This release contains forward-looking statements. These statements are based on current estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future events that may not be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. BASF does not assume any obligation to update the forward-looking statements contained in this release.