Difficult third quarter - BASF proceeds with its restructuring measures
Ludwigshafen, Germany (ots)
Difficult third quarter - BASF proceeds with its restructuring Measures
- Sales increase slightly despite negative currency effects
- EBIT before special items below the previous year's good level
- Significant improvement in Agricultural Products & Nutrition
- Oil & Gas makes largest contribution to income
- Outlook for full-year 2003: EBIT before special items below
previous year's levelIn a business environment characterized by high raw material prices, margin pressure and a weak U.S. dollar, BASF Aktiengesellschaft increased its sales in the third quarter of 2003 by 2.1 percent to EUR 7.7 billion compared with the same period in 2002. Excluding negative currency translation effects, sales increased by 7.6 percent. Price increases contributed 2.1 percent to sales, but prices still remain at an unsatisfactory level. Sales volumes were up 4.5 percent.
"The latest figures for our ongoing business give grounds for hope
that we have now reached the bottom of the downturn. However, there has still not yet been a real breakthrough. 2003 remains a difficult year, as demonstrated by the weak third quarter," said Dr. Jürgen Hambrecht, Chairman of the Board of Executive Directors of BASF Aktiengesellschaft, at a press conference to present BASF's third- quarter results.
Third-quarter income from operations (EBIT) before special items fell 31.8 percent to EUR 403 million compared with 2002. This unsatisfactory operating result is due mainly to continuing pressure on margins in the Chemicals, Plastics and Performance Products segments. High oil prices kept purchasing prices for naphtha and natural gas high. BASF's chemicals operations remain burdened by overcapacities, especially in the United States and in Europe. Prices could therefore not be increased to the extent necessary.
EBIT after special items declined 20 percent to EUR 374 million. Special charges related mainly to restructuring measures in the NAFTA region and integration costs for the crop protection business acquired by BASF.
Net income in the third quarter fell 51 percent to EUR 120 million. In the third quarter of 2002, the financial result contained tax-free gains from the sale of marketable securities. The absence of these tax-free gains in 2003 led to a significant increase in the tax rate compared with the previous year.
Third-quarter earnings per share were EUR 0.21 compared with EUR 0.43 in 2002.
In the first nine months of 2003, BASF posted cumulative sales of EUR 24.8 billion - slightly more than in the same period in 2002. Excluding currency effects, sales would have amounted to EUR 26.7 billion, 10.2 percent more than in 2002. At EUR 2.2 billion, EBIT before special items in the first nine months was 2.3 percent lower than in 2002.
Cash provided by operating activities is a good indicator of BASF's financial strength: At just over EUR 3.5 billion, the figure for the first three quarters was already significantly higher than the full- year value for 2002 of EUR 2.3 billion.
Outlook: Full-year EBIT before special items lower than in 2002
"In the summer, it was already clear that major efforts would be needed to match the previous year's earnings level. But our own efforts are not enough if there is not a sustainable improvement in the economic climate. We saw no signs of such an improvement in the third quarter," said Hambrecht. "Although there are currently initial signs of an economic recovery, high raw material costs, unsatisfactory margins in some areas of our chemicals businesses and the weak U.S. dollar will continue to put pressure on our business in the fourth quarter," he continued. Based on a slight increase in sales, BASF expects EBIT before special items to be lower than in the previous year in both the fourth quarter and for the full year.
Hambrecht also remains realistic when it comes to assessing future
economic developments: "Even though more and more indicators are positive and pointing upward, we have to rely on facts rather than moods." He therefore stated that it is too soon to be able to predict when an economic recovery will set in, how strong it will be and how long it will last.
BASF is therefore focusing on its extensive Group-wide programs and initiatives to optimize its portfolio, reduce costs and restructure its organization. "The success of such measures lies primarily in our own hands," said Hambrecht.
Share buy-back program to be implemented as planned in 2003
In the first nine months of 2003, BASF shares have outperformed the EURO STOXX 50 index and have been included in the Dow Jones Sustainability Index for the third year in succession. BASF aims to implement its share buy-back program as planned in 2003, buying buy back shares for a total of EUR 500 million. The company intends to continue its share buy-back program in 2004.
Performance of the segments in the third quarter of 2003
Agricultural Products & Nutrition and Oil & Gas posted significant increases in sales compared with the strong third quarter of 2002. Chemicals and Plastics maintained sales at the level of the previous year despite the weak dollar. Sales were slightly down in Perfor- mance Products.
The situation is different with regard to EBIT before special items. All segments with the exception of Agricultural Products & Nutrition reported lower income compared with the good third quarter of 2002. This segment improved by more than 36 percent thanks to higher sales volumes as well as extensive cost-reduction measures. As is typical in this sector, third-quarter income was negative due to the seasonal nature of the business.
At EUR 271 million, the largest contribution to income came from the Oil & Gas segment. Sales increased 14.6 percent mainly due to higher volumes in the natural gas trading business. Significantly higher volumes of oil and gas were produced in the exploration and production activities. A higher oil price compared with the same period in 2002 led to an increase in sales, which, however, was partially offset by the weaker U.S. dollar.
Income in the Chemicals segment was negatively impacted by persistently high raw material costs coupled with competitive pressure. Startup costs following conversion of part of the chlorine production facilities at the Ludwigshafen site to a modern membrane process reduced earnings, as did scheduled maintenance of key production plants.
A fall in the price of polymers in Europe and the NAFTA region reduced income in the Plastics segment. In addition, fiber intermediates posted a loss. In September, however, the company was able to implement initial price increases for important polymers. The integration of the business acquired from Honeywell is proceeding as planned and initial cost synergies have been realized.
Third-quarter income in the Performance Products segment also failed to achieve the strong previous year's level. The weak dollar reduced income in the Performance Chemicals and Coatings divisions. The Functional Polymers division improved margins and income despite a difficult market situation.
BASF is the world's leading chemical company, offering its customers a range of high-performance products, including chemicals, plastics, performance products, agricultural products, fine chemicals as well as crude oil and natural gas. Its distinctive approach to integration, known in German as "Verbund," is its strength. It enables BASF to achieve cost leadership and gives the company a competitive advantage. BASF conducts its business in accordance with the principles of sustainable development. In 2002, BASF had sales of about ¤32 billion (circa $34 billion) and over 89,000 employees worldwide. BASF shares are traded on the stock exchanges in Frank- furt (BAS), London (BFA), New York (BF), Paris (BA) and Zurich (BAS). Further information on BASF is available on the Internet at www.basf.com.
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.
You can also obtain further information from the Internet at the following address:
www.basf.de/pcon (English) www.basf.de/pk (German)
07:30 a.m. CET Third Quarter 2003 Interim Report
Press Release
Photos11:00 a.m. CET Speeches by Dr. Jürgen Hambrecht and
Dr. Andreas Kreimeyer (live transmission)11:00 a.m. CET Speeches by Dr. Jürgen Hambrecht and
Dr. Andreas Kreimeyer (printed versions)ots Original Text Service: BASF Internet: http://www.presseportal.de
Contact:
Michael Grabicki
Tel. +49 621 60-99938
Fax +49 621 60-92693
michael.grabicki@basf-ag.de
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