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BASF: Successful start to 2006

Published on 2006-05-05. Author : SpecialChem

  • Further increase in volumes, sales climb 24 percent
  • EBIT before special items rises 19 percent
  • Positive outlook for 2006:
    • Significantly higher sales
    • Increase in EBIT before special items

In the first quarter of 2006, BASF continued its success story with another top performance. "Our declared goal is to create sustainable value by implementing our strategy," said BASF chairman Dr. Jürgen Hambrecht in his presentation of BASF's first-quarter results at the company's 54th Annual Meeting on May 4, 2006.

At €12.5 billion, first-quarter sales were 24 percent higher than in the same period of 2005. Growth was driven above all by considerably higher volumes and price increases in the chemical businesses and in the Oil & Gas segment. Disregarding currency effects, in particular due to the appreciation of the U.S. dollar, sales increased by 20 percent.

Income from operations (EBIT) before special items rose by 19 percent compared with the first quarter of 2005 to €1.9 billion. In the Chemicals segment, significantly higher raw materials and energy prices could not be completely passed on to the market in the form of higher sales prices. Earnings in the Plastics segment rose as a result of higher volumes and improved margins in the global polyurethanes business. The Performance Products segment posted higher earnings thanks in particular to strong volume growth and stable margins in the Coatings division. First-quarter earnings in the Agricultural Products division were negatively impacted by the difficult market environment in Brazil and higher research costs. The profitability of the products lysine and vitamin C remained unsatisfactory in the Fine Chemicals division. Higher prices and expansion of the natural gas trading business led to very good earnings in the Oil & Gas segment.

First-quarter EBIT after special items rose by 23 percent to €1.8 billion. Special items were related to income from the ongoing portfolio optimization measures in the Agricultural Products division and expenses for restructuring, which are recorded under "Other" until they are implemented in the course of the year.

The financial result declined by €24 million to €21 million. In the first quarter of 2005, the financial result still contained earnings from BASF's stake in the Basell joint venture, which was sold in the third quarter of 2005. Income before taxes and minority interests rose by 21 percent to €1.9 billion.

The tax rate was 46 percent compared with 40 percent in the first quarter of 2005. This increase was due to the higher contribution to earnings from the Oil & Gas segment. Taxes for oil production that are noncompensable with German corporate income tax amounted to €272 million compared with €198 million in the same period of 2005.

Net income increased 10 percent to €950 million. Earnings per share were €1.87 compared with €1.60 in the same period of the previous year.

Positive outlook for full-year 2006

Hambrecht's outlook for full-year 2006 is confident, based on global economic growth of more than 3 percent. In 2006, BASF expects an average oil price of $60 per barrel of Brent crude and an average euro/dollar exchange rate of $1.25 per euro.

Hambrecht formulated his optimistic prognosis as follows: "Our business has developed very positively since the beginning of 2006, and the level of orders remains extremely robust. We have seen two strong years in a row, and we are confident that we will continue our successful performance in 2006. We aim to continue to grow faster than the market. Above all, though, we want to achieve profitable growth. We expect to post higher EBIT before special items compared with the previous year's strong level. This depends, of course, on a stable geopolitical environment and the development of the crude oil price."

Growth in Europe, North America and Asia

In Europe, sales by location of company increased by 28 percent in the first quarter of 2006. EBIT before special items rose by €286 million to €1.4 billion. The higher sales and earnings were primarily due to the contribution of the Oil & Gas segment.

First-quarter sales by location of company in North America rose by 7 percent in dollar terms. The sales growth was due in particular to the Chemicals and Plastics segments. EBIT before special items increased by €27 million to €298 million.

In Asia Pacific, we increased sales in local currencies by 19 percent. EBIT before special items rose €28 million to €115 million. Growth in the Chemicals segment was due especially to the Verbund site in Nanjing, China, which started operations in the second quarter of 2005.

Sales by location of company in South America, Africa, Middle East declined by 11 percent in local currency terms. EBIT before special items was €39 million lower than in the same period of 2005 because of the difficult market environment in the agricultural products business in Brazil. The Coatings division recorded strong business, in particular with decorative paints.

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).

This press release contains forward-looking statements. All statements contained in this press release that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. 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 SEC.

Source: BASF

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