BASF reports strong earnings in third quarter of 2017
“The positive demand development continued in the third quarter of 2017. We achieved solid volume growth, even compared with the strong prior-year quarter,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE.
Sales of EUR15.3 billion
BASF Group sales rose by 9% compared with the prior-year quarter to EUR15.3 billion. This was primarily attributable to good volumes development as well as significantly higher sales prices in the Chemicals segment. Sales were also lifted by the Chemetall business, acquired in December 2016. All segments recorded slightly negative currency effects.
The strong contribution from the Chemicals segment lifted income from operations (EBIT) before special items by EUR244 million to EUR1.8 billion.
Outlook for full-year 2017
BASF has slightly raised its expectations for the global economic environment in 2017 (forecast from the Half-Year Financial Report 2017 in parentheses):
- Growth of gross domestic product: 2.8% (2.5%)
- Growth in industrial production: 3.1% (2.5%)
- Growth in chemical production: 3.4% (3.4%)
- Average euro/dollar exchange rate of $1.10 per euro ($1.10 per euro)
- Average Brent blend oil price for the year of $50 per barrel ($50 per barrel)
“For the second half of 2017, we now expect the BASF Group’s EBIT before special items to considerably exceed the level of the second half of 2016,” said Bock. “We are maintaining our forecast for sales, EBIT before special items and EBIT for full-year 2017: We expect them to increase considerably. The same now also applies to EBIT after cost of capital, for which we previously anticipated a slight increase.”
Sales in the Chemicals segment rose by 25% compared with the prior-year quarter to approximately EUR4 billion. This was largely due to higher prices in all divisions, especially in Monomers. BASF also significantly increased sales volumes. Currency effects slightly dampened sales in all divisions. EBIT before special items rose by over EUR600 million to EUR1.1 billion. This was mainly a result of higher margins, especially in the Monomers division. The negative impact on earnings in the third quarter of 2017 caused by the North Harbor accident at the Ludwigshafen site was compensated by insurance payments. Fixed costs rose slightly.
Performance Products segment
In the Performance Products segment, sales increased by 2% compared with the third quarter of 2016 to just under EUR4 billion as a result of volumes growth in all divisions. Sales prices were on a level with the prior-year quarter. Price increases in the Dispersions & Pigments and Care Chemicals divisions were largely offset by significant price declines in the Nutrition & Health division. Currency effects, particularly from the U.S. dollar, and portfolio effects dampened sales growth. EBIT before special items declined by EUR88 million to EUR385 million. This was largely attributable to ongoing pressure on margins in a number of business areas due to higher raw materials prices.
Functional Materials & Solutions segment
Sales in the Functional Materials & Solutions segment were up 7% on the third quarter of 2016, at around EUR5 billion. This was attributable to higher prices as well as the Chemetall business, which was acquired from Albemarle in December 2016. Sales volumes rose in every division except Catalysts. Compared with the third quarter of 2016, sales volumes to the automotive and construction industries were further expanded. Sales were slightly weighed down by currency effects. At EUR397 million, EBIT before special items was down EUR100 million on the prior-year quarter. Earnings were dampened primarily by lower margins resulting from higher raw materials prices.