Third-quarter results
BASF: Robust in an unprecedented year
Ludwigshafen, Germany (ots)
* Prepared for a difficult year 2002
* Sales and earnings decline due to a weak economy in the third
quarterBASF is proving robust in an unprecedented year and has ended every quarter in the black. BASF's year-end earnings will also be clearly positive. In the first nine months of 2001, BASF's sales from ongoing business amounted to more than EUR 24 billion. This corresponds to an increase of just over 8 percent compared with the same period in 2000. From January through September, income from operations on the basis of ongoing business before special items was about EUR 2 billion, down 15 percent compared with the first three quarters of 2000.
"2001 has been an unprecedented year for the global economy," explained Dr. Jürgen F. Strube, Chairman of BASF's Board of Executive Directors, in a speech presenting the company's third-quarter figures. Following a promising start, growth declined significantly in the second quarter, he said. In the third quarter this developed into a noticeable downturn that most likely will continue in the fourth quarter. Strube continued: "We have adapted to this difficult economic climate and have taken timely precautions, although we are unable to ignore economic realities. But one thing is certain: Because the chemical industry is an early starter when there is an upturn in the economy, BASF will be among the first to register the signs in its order books when it comes."
Short and long-term measures implemented in a targeted fashion
In the current economic climate, decisive and targeted action is more important than ever. Already in summer this year, BASF started a series of coordinated programs and initiatives that will act in the short, medium and long term.
The package of measures includes reducing capital expenditures to the level of depreciation, thus lowering the level of funds allocated to investments by ¤400 million in the coming year.
In the consolidation of its plants and sites, BASF has identified additional savings potential of around EUR 50 million. As a result, the company plans to increase savings in 2002 from the figure of EUR 190 already announced in August to a total of EUR 240 million.
At its major sites, capacity utilization at BASF has fallen to the lowest level for many years. As a countermeasure, the company is examining which plants can be shut down temporarily.
In the first half of 2001, BASF recorded one-time costs of EUR 620 million for the implementation of this package of measures. BASF will also make provisions in the fourth quarter for additional measures and anticipates special items of the order of EUR 850 million for the entire year.
These measures are intended to improve the company's position. At the same time, BASF is driving forward additional projects to increase its competitiveness.
One example is the streamlining of its organization: On the one hand, this will reduce personnel, material and marketing costs. One the other hand, it will extend and deepen BASF's relationships with its customers. The new global and regional business units started their work in summer, and now European business centers are being established close to their markets.
In all, the further development of BASF's organization will provide cost advantages of ¤400 million.
BASF's segments in the third quarter of 2001
The Chemicals segment suffered as a result of very volatile naphtha prices, which particularly affected the Petrochemicals division. Pressure on margins persisted in all product areas and volume demand declined at the end of the quarter. As in previous quarters, the Inorganics division developed positively.
Sales in the Plastics & Fibers segment were adversely affected by weak demand from important customer industries. The Polyurethanes division performed well overall, but was unable to achieve the same level of third-quarter sales as in 2000. The business situation in the Styrenics division remained difficult because of low margins.
In the Performance Products segment, the fusion of the former Specialty Chemicals and Colorants divisions to form the Performance Chemicals division is resulting in considerable synergy effects. The structural measures undertaken in the Performance Polymers division are starting to show effect.
Agricultural Products & Nutrition: In the course of the year, the market environment for agricultural products proved more difficult than expected for all companies. Yet despite a contracting market worldwide, BASF's Agricultural Products division remains on track. This is also true despite the fact that the financial situation in South America impaired growth in the third quarter. BASF intends to further extend its strong market position with innovative products such as its new fungicide F 500(R).
Business in the Fine Chemicals division continued to develop well in the third quarter. Sales increased, in particular with regard to products for animal nutrition and for the pharmaceutical and cosmetics industries.
As in previous quarters, the Oil & Gas segment made the largest contribution to earnings, although sales and earnings were lower compared with the third-quarter of 2000 due to a decline in oil prices by almost 17 percent. The oil and gas business again demonstrates its strategic strength in BASF's portfolio in times of weak economic growth and high raw materials prices.
Outlook
As BASF's chairman pointed out, no one can say when there will be a reversal of the current economic trends and when there will be an upturn in the global economy. "In the current world political situation, the upturn will not depend on economic factors alone," Strube said.
Strube expects that the United States and its allies, together with OPEC, will succeed in stabilizing the economic situation. However, the danger of a worldwide recession should not be overlooked, and although there are positive signals such as the stabilization of oil prices as well as low interest rates and low inflation, negative factors predominate. BASF therefore expects that 2002 will be a difficult year for industry and is preparing accordingly.
BASF is a transnational chemical company that aims to increase and sustain its corporate value through growth and innovation. The company's product range includes high-value chemicals, plastics, colorants and pigments, dispersions, automotive and industrial coatings, agricultural products and fine chemicals as well as crude oil and natural gas. BASF's approach to integration, known in German as "Verbund," is one of its particular strengths, ensuring cost leadership and a unique competitive advantage. With sales of about EUR 36 billion (circa $34 billion) in 2000 and over 90,000 employees, BASF is one of the world's leading chemical companies. BASF acts in accordance with the principles of Sustainable Development. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), Zurich (BAS), Paris (BA) and New York (BF). The company's Internet address is www.basf.com.
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Forward-looking statements
This release contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, 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 prove to 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. Such factors include those discussed in BASF's Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this release.
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