BASF: Considerably higher earnings in chemicals business, Oil & Gas significantly below prior-year quarter
2nd quarter 2016:
Sales €14.5 billion (minus 24%): higher volumes, lower prices and significantly negative portfolio effects
EBIT before special items €1.7 billion (minus 16%)
Performance Products and Functional Materials & Solutions with considerably higher earnings
Significantly lower sales and earnings in Oil & Gas due to portfolio effects and lower prices
Outlook 2016 for BASF Group confirmed:
- Considerable sales decline due to divestiture of gas trading business
- EBIT before special items expected at level slightly below 2015
Ludwigshafen, Germany – July 27, 2016 – In the second quarter of 2016, BASF saw a slight improvement in the macroeconomic environment. The increase in oil price and pickup in demand since the end of March underline this development. “We experienced robust demand, especially from the automotive and construction industries. However, the macroeconomic situation remains difficult to predict,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE.
Sales of BASF Group decreased by 24% in the second quarter to €14.5 billion compared with the same period of 2015. Two-thirds of this decline were the result of portfolio effects (minus 16%). These were 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. In addition, lower raw material prices, especially in the Chemicals segment, led to a drop in sales prices (minus 7%). Except for Agricultural Solutions, all segments contributed to the slight increase in sales volumes (plus 2%). In the chemicals business, which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments, volumes rose 4%. There were negative currency effects in all divisions (minus 3%).
In the second quarter, income from operations (EBIT) before special items declined by €336 million to €1.7 billion compared with the strong prior-year quarter. Significantly higher earnings in the chemicals business could not compensate for substantially lower contributions from the Oil & Gas segment. Compared with the previous second quarter, EBIT was down by €321 million to €1.7 billion.
Net income decreased by €173 million to €1.1 billion. Earnings per share were €1.19 in the second quarter of 2016, compared with €1.38 in the same period of 2015. Adjusted for special items and amortization of intangible assets, earnings per share amounted to €1.30 (second quarter of 2015: €1.49).
Outlook for full year 2016
For 2016, the company anticipates a continuation of the currently challenging market conditions along with substantial risks. BASF’s expectations for the global economic environment in 2016 remain unchanged:
Growth in gross domestic product: 2.3%
Growth in 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
“We confirm our 2016 forecast for BASF Group sales and EBIT before special items: We aim to increase sales volumes. BASF Group sales will decline considerably, however, primarily as a result of the divestiture of the gas trading and storage business as well as lower oil and gas prices. We continue to expect EBIT before special items to be slightly below 2015 levels,” said Bock.
“Our outlook for 2016 remains ambitious in the current volatile and challenging environment, and is particularly dependent on further oil price development. With this in mind, we remain focused on cost-containment and restructuring measures, which have proven effective in the first half of 2016. Our recent portfolio measures will contribute to the mid and long-term success of our company,” explained Bock.