Materials, O&G price decline dent BASF results

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Lower raw materials and oil & gas prices have caused a drop in sales and earnings of speciality chemicals and materials giant BASF SE, the company announced Feb. 24. 

The Ludwigshafen, Germany-based company said for the full year 2016, sales decreased by 18 percent to 57.6 billion euros. 

This, said BASF, was mainly due to “the divestiture of the gas trading and storage business as part of the asset swap with Gazprom at the end of September 2015.” 

This business had contributed €10.1bn to sales in 2015.

In addition, lower raw material prices led to a drop in sales prices although the company managed to raise sales volumes over the course of the year. 

Compared with the previous year, volumes increased by 2 percent, and in the chemicals business, by 4 percent. 

Earnings (EBIT before special items) also declined 6 percent to 6.3 billion euros. 

This was largely a consequence of a decline of about 850 million euros in the Oil & Gas segment, mainly resulting from falling prices and the divestiture of the natural gas trading and storage business. 

The chemicals business, however, increased earnings considerably thanks to sharply improved contributions from the performance products and functional materials & solutions segments. 

In the performance products segment, sales in the fourth quarter declined by 1 percent to 3.6 billion euros.  

EBIT before special items rose slightly to 231 million euros, supported by improved margins. 

At 15 billion euros, full-year sales were 4 percent below the level of the previous year and earnings before special items increased by 379 million to 1.7 billion euros. 

This was mostly due to reduced fixed costs which was the result of restructuring measures and strict fixed cost management. 

Speaking at the BASF annual press conference in Ludwigshafen, Germany, Chairman Kurt Bock said the company was “cautiously optimistic” for 2017. 

“The global economy will presumably grow about as fast as in 2016. In light of significant political uncertainty, volatility will remain high,” he noted. 

According to BASF, considerable slowdown in growth in the European Union is expected in 2017, while a “slight upturn” in growth is anticipated for the United States.

In emerging markets, growth in China is likely to slow down further while recessions in Brazil and Russia are expected to end. 

BASF scaled back in terms of investment in 2016 by more than 1 billion euros. The company invested a total of 3.9 billion euros in capital expenditures and plans to invest in comparable levels in the coming years. 

“We are now filling the existing capacity in our new plants and thus building on the volume momentum seen last year,” said Bock.

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