Good start for BASF in 2018

Good start for BASF in 2018

“Last year, we achieved significant growth and were able to further increase our profitability. Moreover, we laid down the important groundwork for the future development of our company—both in terms of people and strategy,” said Dr Kurt Bock, chairman of the Board of Executive Directors of BASF SE, at the presentation of the 2017 Annual Report in Ludwigshafen.

In the fourth quarter of 2017, BASF Group posted sales of €16.1 billion ($19.7 billion), which represents a growth of 8 per cent compared with the same quarter of 2016. Prices rose by 9 per cent. BASF’s sales volume increased by 4 per cent, driven by all segments with the exception of oil and gas.

By contrast, negative currency effects were significantly higher and reduced sales by 5 per cent. Income from operations (EBIT) before special items in the fourth quarter was €1.9 billion, up 58 per cent against the same period of the prior year.

The significantly higher earnings in the chemicals, agricultural solutions and oil and gas segments as well as in others compensated for lower earnings in the functional materials and solutions and performance products segments.

Economic activity picked up in many countries in 2017. “We took advantage of this upturn and markedly increased our full-year 2017 sales and earnings compared with the previous year,” said Bock.

Thanks to good demand, BASF sold greater volumes in all divisions and considerably increased its profitability. Higher prices, especially in the chemicals segment, also contributed to this. Overall, BASF’s sales grew by 12 per cent to €64.5 billion ($78.9 billion). One contributing factor was Chemetall business acquired at the end of 2016, which offers tailor-made solutions for metal surface treatment.

BASF’s earnings rose even more sharply, by around one-third. The company achieved EBIT before special items of €8.3 billion ($10.1 billion), with a significant contribution from the chemicals segment.

Higher margins and volumes in basic chemicals and intermediate businesses more than offset the lower margins in some of BASF’s specialty businesses. Earnings in the chemicals business—which comprises the chemicals, performance products, and functional materials and solutions segments—were significantly higher than in the previous year. EBIT before special items in this business was €7.3 billion (8.9 billion), up 26 per cent versus the prior year.

Earnings per share increased from €4.42 to €6.62 ($5.4-8.09), equivalent to a rise of 50 per cent. Adjusted for special items and the amortisation of intangible assets, earnings per share amounted to €6.44 ($7.87), compared with the €4.83 ($5.91) in the previous year.

Good start for BASF in 2018

Development of BASF’s portfolio

In the past year BASF made important decisions to add fast-growing, cyclically resilient businesses to its portfolio. In 2018, the agricultural solutions segment will be strengthened with the acquisition of significant parts of Bayer’s seed and herbicide businesses.

“These will be an excellent complement to our well-established and successful crop protection business and our biotechnology activities. Also, we will enter the seed business with proprietary assets in key agricultural markets, which will also allow us to more quickly implement the results of our seed research,” Bock said.

BASF wants to acquire Solvay’s global polyamide business this year. This will expand BASF’s range of engineering plastics for the transportation, construction, and consumer goods industries and will strengthen its access to raw materials. Furthermore, the company expects to improve access to important growth markets in Asia and South America.

“However, we also divest businesses when we believe they could be more successful in a different constellation,” said Bock. For example, BASF transferred its business with leather chemicals to Stahl Group, a leading producer of process chemicals for leather products, at the end of September 2017. In return, BASF now holds a 16 per cent share in Stahl Group.

BASF has announced fundamental changes in its oil and gas activities. It is planned that BASF and LetterOne group will merge their respective oil and gas activities in a joint venture called Wintershall DEA.

The new company would be one of the largest independent exploration and production companies in Europe with excellent growth prospects. In the medium term, the intent is to list the joint venture on the stock exchange.