Earnings Preview: BASF 3Q results

German chemical company BASF expected to report lower sales, profits for third quarter

• By George Frey, AP Business Writer
• On 9:43 am EDT, Monday October 26, 2009

FRANKFURT (AP) -- German chemical company BASF SE reports earnings for its third quarter Oct. 29. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: BASF, based in Ludwigshafen, is the world's biggest chemical company with revenue of euro62 billion ($93 billion) and net profit near euro3 billion in 2008.

A preliminary earnings statement from the company earlier this month said sales for the July-September quarter were euro12.8 billion ($18.95 billion) -- down 19 percent from a year earlier but 2.4 percent higher than in the second quarter. BASF did not provide preliminary net income figures.

The company says demand has fallen sharply in recent months as global production of manufactured goods like cars has choked off demand for paints, adhesives and rubber at its chemicals division. Falling energy demand has led to declines at its Wintershall division which explores for and refines oil and natural gas.

Furthermore, the company is experiencing integration costs related to the purchases last year of Norwegian energy exploration company Revus Energy ASA, and Swiss chemical company Ciba Holding AG.

When BASF released its first quarter results, the company said it would have to cut at least 2,000 jobs this year besides the hundreds of German workers it already put on reduced schedules in response to the downturn. It's also shutting some sites altogether in Belgium, Germany and Spain.

BASF also said it would look into selling or shuttering 23 of the 55 worldwide production sites and other offices of newly acquired Ciba, a plan that would cost 3,700 jobs at the combined company. BASF agreed in September 2008 to buy Switzerland-based Ciba for $5.1 billion in cash.

BY THE NUMBERS: Six analysts polled by Thomson Reuters expect BASF to report a net profit for July-September period of euro333 million. Eleven analysts expect revenue of euro13 billion.

In the third quarter of 2008, BASF reported a net profit of euro758 million on revenue of nearly euro16 billion.

ANALYST TAKE: Vara Research in Frankfurt said BASF revised downward its own estimates of 2009 worldwide economic conditions, when BASF said that no lasting improvement in the economic situation was expected in the second half of the year. That came while BASF said restocking and economic stimulus packages would likely provide only temporary improvement in demand.

Vara says the consensus on the stock is "accumulate," though it doesn't have a target price on the shares.

WHAT'S AHEAD: Observers will continue to look at the severity and duration of the global downturn which has affected the practices and balance sheets of German companies. Germany is the world's biggest exporter.

BASF continues to bet on a turnaround. Last month, it said it plans to invest euro2 billion in Asia through 2013, targeting faster demand growth in the region. BASF said its regional strategy for the next decade entails increasing employee numbers in the region by at least 5,000 people from around 15,000 currently. The company currently employs some 97,000 globally.

STOCK PERFORMANCE: BASF shares were trading at euro39.83 Oct. 23, just shy of their 52-week high of euro40.94 set earlier this month. The stock's 52-week low of euro18.01 was set in the fourth quarter 2008.

http://www.basf.com

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