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BASF in top form: Record earnings in 2005, confident outlook for 2006

Published on 2006-02-22. Author : SpecialChem

  • Record sales (up 14 percent) and record EBIT before special items (up 17 percent).
  • Premium earned on cost of capital.
  • Cash provided by operating activities increases further (up 13 percent).
  • Board of Executive Directors proposes to increase dividend by 30 euro cents to €2.00 per share.
  • BASF optimistic for full year 2006.

BASF – The Chemical Company – posted the best results in its history in 2005. The company again grew profitably and faster than the market in 2005 on the basis of its own efforts and astute acquisitions. At its Annual Press Conference on February 22, 2006 in Ludwigshafen, BASF reported sales of €42.7 billion (up 14 percent) and income from operations (EBIT) before special items of more than €6.1 billion (up 17 percent).

"Our results speak for themselves. We increased the premium earned on our cost of capital to just under €2.4 billion, and I would like to thank the entire BASF team for its outstanding achievements," said Dr. Jürgen Hambrecht, Chairman of BASF's Board of Executive Directors.

Board of Executive Directors proposes higher dividend

The capital markets also had a favorable opinion of BASF's achievements: BASF shares increased in value by 26.2 percent in 2005 and outperformed the EURO STOXXSM 50 Total Return Index. The company wants to offer its shareholders an attractive dividend for fiscal year 2005. The Board of Executive Directors is therefore recommending to the Supervisory Board to propose to the Annual Meeting an increased dividend of €2.00 per share – 30 euro cents more than in 2004.

Outlook for the full year 2006

Hambrecht's top priority is to ensure BASF's long-term competitiveness. We will therefore proceed with our efficiency-enhancing measures and restructuring programs," he said.

Looking to the full year, Hambrecht is confident: "We aim to continue to grow faster than the market, follow on from the strong level of income from operations before special items posted in 2005, and again earn a premium on our cost of capital."

Chemicals segment posts record sales

With an increase of 15.4 percent compared with 2004, the Chemicals segment posted record sales as a result of higher volumes and prices.

The Plastics segment recorded significantly higher EBIT, which was up 46 percent on the previous year. The pressure on margins increased toward the end of the year due to high and volatile raw material prices.

The Performance Products segment benefited from BASF's Verbund and its increasingly strong position in Asia. In 2005, the decline in sales caused by the divestiture of the printing systems business in the previous year was more than compensated for.

In the Agricultural Products & Nutrition segment, earnings in the Agricultural Products division rose despite higher spending on research and development. In the Fine Chemicals division, lower prices in important product lines significantly impacted sales and earnings. The company has launched an extensive restructuring program in this division and expects higher sales and earnings in 2006.

Sales and earnings in the Oil & Gas segment grew by double-digit amounts and reached new highs. This was due to the significant rise in oil prices, increased oil and gas production and the expansion of the natural gas trading business.

Significant sales growth in all regions

In 2005, sales by location of company grew by double-digit rates in Europe (plus 11 percent), North America (plus 17 percent) and Asia Pacific (plus 23 percent). Sales in South America, Africa, Middle East rose 7 percent.

Earnings growth in North America was particularly strong: EBIT tripled compared with the previous year. The target of reducing fixed costs by $250 million was achieved ahead of schedule. BASF is continuing with its programs to increase efficiency and has now set itself the goal of saving additional costs of $150 million per year by mid-2007.

The improvement in EBIT in Europe was due above all to growth in BASF's oil and gas business and plastics operations, as well as to cost-saving programs.

In Asia, EBIT declined by 18 percent compared with 2004. This was mainly due to a difficult market environment for intermediates as well as high and volatile raw material costs for styrenics. Earnings were also negatively impacted by special items, for example for the planned closures of the THF and PolyTHF® plants in Yokkaichi, Japan.

Earnings declined slightly in the South America, Africa, Middle East region, where the agricultural products business was affected by dry weather in Brazil and Argentina.

Current share buyback program completed

Chief Financial Officer Dr. Kurt Bock explained the factors that influenced BASF's sales growth. Apart from a sustained, satisfactory increase in sales volumes of 2.5 percent, the development was due primarily to higher prices in nearly all areas of BASF's portfolio. Currency effects once again played an important role in the fourth quarter, but had only a minor overall impact on sales for the full year.

Cash provided by operating activities before external financing of pension obligations increased to €5.25 billion. This increase of 13.3 percent was mainly due to BASF's significantly higher earnings.

BASF also continued to buy back shares in 2005, returning approximately €1.4 billion to its shareholders in this way. In 2005, the company bought back more than 26 million shares at an average price of €55.05. As a result, it has reduced the number of outstanding shares by 19.8 percent since starting its share buyback programs in 1999.

In 2006, BASF continued with the €1.5 billion share buyback program that it announced in April 2005. Between the start of the year and the middle of February, it bought back just under 5.4 million shares for €339 million, thus completing the program as planned. BASF's Board of Executive Directors will request further authorization to repurchase shares at the Annual Meeting in May 2006.

BASF is the world's leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products, agricultural products and fine chemicals to crude oil and natural gas. As a reliable partner to virtually all industries, BASF's intelligent system solutions and high-value products help its customers to be more successful. BASF develops new technologies and uses them to open up additional market opportunities. It combines economic success with environmental protection and social responsibility, thus contributing to a better future. In 2005, BASF had approximately 81,000 employees and posted sales of more than €42.7 billion. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), New York (BF) and Zurich (AN).

BASF will publish its Financial Report and Corporate Report on March 14, 2006.

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. [The Annual Report 2005 on Form 20-F will be available on the Internet at corporate.basf.com as of March 14, 2006.] We do not assume any obligation to update the forward-looking statements contained in this release.

Source: BASF

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