LUDWIGSHAFEN, GERMANY--(Marketwired - Jul 25, 2013) - BASF increased sales by 3% in the second quarter of 2013 to just under EUR 18.4 billion thanks to higher sales volumes in all segments. Income from operations (EBIT) before special items decreased by 5% to around EUR 1.8 billion. In the first half of 2013, sales reached around EUR 38.1 billion, surpassing the level of the previous first half by 4%. EBIT before special items increased by 3% to more than EUR 4 billion.
"In light of the challenging conditions, our business performed well in the first half of 2013. Our business with crop protection products contributed substantially to sales and earnings growth. Earnings rose considerably in the Functional Materials & Solutions segment. Higher volumes in the Oil & Gas segment also boosted sales and earnings development," said Kurt Bock, Chairman of the Board of Executive Directors of BASF SE at the company's half-year press conference.
At just under 2%, global gross domestic product grew more slowly in the first half of 2013 compared with the same period of the previous year. Global industrial production only rose by around 1% over the same period. Bock said: "The economic environment is and remains volatile. The European economy is shrinking slightly; the Chinese growth engine is no longer running at full power; the United States is growing moderately. We are clearly feeling these effects and are doing everything we can to maneuver BASF successfully through this challenging environment."
Business development in North America
In North America, sales by location of company increased by 9% in U.S. dollars and 7% in euro terms in the second quarter of 2013. Sales rose significantly in the Agricultural Solutions segment, driven primarily by considerably higher sales volumes and the acquisition of Becker Underwood. Earnings grew by EUR 158 million to EUR 485 million.
"For the first half of the year, our sales increased by 4% in U.S. dollars and 2% in euro terms amounting to EUR 7.7 billion in North America. EBIT in North America increased by approximately EUR 250 million to around EUR 940 million, due to strong increases in the Petrochemicals, Agricultural Solutions, Care Chemicals and Coatings businesses," said Hans Engel, Chief Executive Officer of BASF Corporation and Chief Financial Officer of BASF SE.
Outlook for full year 2013
Based on the economic development of the first six months of 2013, the company's estimates for the economic environment are more conservative than they were previously. BASF now forecasts the following for the global economy in 2013 (previous forecast in parentheses):
- Growth of gross domestic product: 2.0% (2.4%)
- Growth in industrial production: 2.7% (3.4%)
- Growth in chemical production: 3.1% (3.6%)
- An average euro/dollar exchange rate of $1.30 per euro (unchanged)
- An average oil price for the year 2013 of $105 per barrel ($110 per barrel)
Worldwide economic growth and demand for chemicals are not expected to accelerate in the second half of 2013. An uneven development marked by economic uncertainty is anticipated. Bock: "Despite this, we still aim to exceed the 2012 levels in sales and EBIT before special items. Achieving our earnings target is significantly more challenging today than we had expected at the beginning of the year."
BASF's excellence program STEP, which as of the end of 2015 is expected to contribute around EUR 1 billion to earnings each year compared with the base year 2011, is running on schedule and savings of EUR 300 million will be achieved this year. Due to uncertainty about further business development, the increase in personnel particularly planned in emerging markets will proceed more slowly.
High operating cash flow
In the second quarter of 2013 as in the previous quarter, cash provided by operating activities amounted to around EUR 2.0 billion. Thus, it totaled EUR 4.0 billion in the first half of 2013, up by EUR 619 million year-on-year. Cash and cash equivalents amounted to EUR 2.2 billion as of June 30, 2013, compared with EUR 1.6 billion at the end of 2012. Net debt rose to EUR 12.5 billion as of the end of the second quarter of 2013, compared with EUR 11.2 billion as of December 31, 2012. "We made use of the low interest rates and issued bonds with a nominal value of around EUR 2.1 billion in the first half of 2013. The equity ratio of BASF Group was a very solid 41% as of June 30, 2013," said Engel.
Business development in the segments in the second quarter
In the Chemicals segment, sales decreased by 4% in a weak environment. Sales prices declined due to lower raw material costs. Sales volumes rose slightly. Compared with the second quarter of 2012, EBIT before special items declined by EUR 106 million to EUR 495 million. This was mainly the result of weaker margins for caprolactam and polyamides.
In the Performance Products segment, sales were down by 1% on account of negative currency effects and lower sales prices resulting from reduced raw material costs. Increased volumes in Care Chemicals as well as portfolio effects from the acquisition of Pronova BioPharma in the Nutrition & Health division had a positive impact on sales. Intense competition in some product lines and the depreciation of the yen against the euro led to a decrease in EBIT before special items of EUR 48 million to EUR 394 million. In the second quarter of 2012, insurance payments for damage sustained from the earthquake and tsunami disaster in Japan had contributed positively to earnings.
There was an increase in volumes and prices in the Functional Materials & Solutions segment and thus sales rose by 2%. Currency effects reduced sales growth. At EUR 293 million, EBIT before special items exceeded the level of the previous second quarter by EUR 77 million. Better margins made a significant contribution to this.
Business continued to develop very successfully in the Agricultural Solutions segment: Compared with the second quarter of the previous year, sales increased by 18% to EUR 1.7 billion. EBIT before special items rose by EUR 71 million to EUR 485 million. Sales volumes in all regions and indications rose. Furthermore, higher prices and the acquisition of Becker Underwood also contributed to this sales and earnings growth.
In the Oil & Gas segment, sales grew by 10% despite lower oil prices. This was mostly a result of increased volumes in natural gas trading. At EUR 382 million, EBIT before special items significantly exceeded the level of the previous second quarter thanks to a higher contribution from the Exploration & Production business sector.
Sales in Other were 11% above the same quarter of the previous year. EBIT before special items declined to minus EUR 217 million, mainly due to valuation effects for the long-term incentive program: While the second quarter of 2013 included expenses for recognizing provisions, provisions had been reversed in the second quarter of 2012.
BASF - The Chemical Company
BASF Corporation, headquartered in Florham Park, New Jersey, is the North American affiliate of BASF SE, Ludwigshafen, Germany. BASF has more than 16,600 employees in North America, and had sales of $18.5 billion in 2012. For more information about BASF's North American operations, visit www.basf.us.
BASF is the world's leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. We combine economic success with environmental protection and social responsibility. Through science and innovation, we enable our customers in nearly every industry to meet the current and future needs of society. Our products and solutions contribute to conserving resources, ensuring nutrition and improving quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF had sales of EUR 72.1 billion in 2012 and more than 110,000 employees as of the end of the year. Further information on BASF is available on the Internet at www.basf.com.
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North American Press Release (English only)
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.