BASF reports higher sales and earnings...
BASF on Friday announced a significant rise in fourth-quarter sales and earnings. In its outlook for 2017, it says it expects considerable sales growth in all segments and a slight increase in earnings before interest and tax (EBIT) before special items. EBIT before special items in the fourth quarter was up 15% year-on-year (YOY) to €1.2 billion ($1.27 billion) on 7% higher sales of €14.8 billion.
In the chemical segment, fourth-quarter sales increased by 12% to €3.6 billion, on higher volumes and prices. EBIT before special items rose by €386 million to €635 million, on higher margins, especially in isocyanates and cracker products. Performance products registered a 1% YOY decline in sales, to €3.6 billion, while EBIT before special items was 1% higher at €231 million, supported by improved margins. In the functional materials and solutions segment, fourth-quarter sales grew 10% to €5.0 billion driven by higher volumes. EBIT before special items increased by €69 million to €458 million due to volumes growth, a favorable product mix and cost discipline. Agricultural solutions reports a 10% YOY increase in sales, to €1.3 billion, on higher volumes. EBIT before special items was down 45% to €79 million due to costs associated with new or expanded production facilities. Oil & gas segment sales rose 26% YOY to €922 million due to higher volumes and prices. EBIT before special items was up 28% to €163 million.
BASF chairman Kurt Bock, speaking at a press conference in Ludwigshafen, said the company is cautiously optimistic about 2017. “We want to grow further, with all segments contributing to this growth. More importantly, we want to increase our earnings again, also in the oil and gas business.” The company expects slightly higher sales in performance products and considerable increases in the remaining segments.
In 2017, BASF expects the global economy to grow about as fast as last year but assumes that volatility will remain high in light of significant political uncertainty. The company expects a considerable slowdown in growth in the European Union but a slight upturn in growth in the United States. “Growth in China is likely to continue to slow further…and it is expected that the recession in Brazil and Russia will end,” the company says.
... expects capex to remain flat, interested in M&A opportunities
BASF chairman Kurt Bock and CFO Hans-Ulrich Engel, speaking at the company's earnings press briefing today in Ludwigshafen, discussed possible agricultural chemicals business acquisitions, capital expenditure, and a return to Iran as an active player. BASF scaled back its capital expenditure in 2016 by more than €1 billion ($1.06 billion) to €3.9 billion, and plans to invest at a comparable level in the coming years. “In the long term, Asia will continue to be the growth driver in global chemicals market and China is by far the largest market with 30% of global demand.” BASF this year is starting production of citral and L-menthol at its integrated site at Kuantan, Malaysia. However, BASF is still not producing at capacity at the Chongqing, China MDI facility due to problems with supply of chlorine to the plant, Bock says. Bock also said that the authorities in Iran have asked BASF to evaluate possible investments in the oil and gas industry and the company is currently looking at this. The plan does not include chemicals, however. Engel said BASF's methanol-to-propylene (MTP) project in the United States remains on hold. “We keep revisiting it on an ongoing basis.” When the company first announced the plan in 2014 the economics, including the price of oil, were more favorable. BASF “keeps looking at the project, probably twice a year until there is more certainty what is going to happen to propylene prices,” Engel says. BASF is short of propylene in the US and “at current propylene prices, is okay with buying” product to meet the shortfall. As to whether BASF would be interested in buying any of the agchems businesses that will need to be divested by Dow-DuPont, Bayer-Monsanto or ChemChina-Syngenta, to receive antitrust approvals for their respective mergers, Bock said that BASF would like to be bigger than it now is in agchems and would be willing to look at opportunities.