BASF shrugs off styrene woes

While all around indulge in startling spending-sprees or the contortions of frantic restructuring, the German chemicals leviathan BASF sails on. Results for the first six months of 1997 showed a 5.8 per cent rise in pre-tax profits, to DM4.3billion, on sales up 14.5 per cent at DM48.8billion.

As with most of its compatriots (see page 7), much of the sales increase was due to 'favourable trends in volumes.' Chairman Jurgen Strube noted that the strong dollar had helped sales achieve almost 20 per cent growth in North America and the Asia-Pacific region, while European sales rose 13 per cent, due to a strong increase in oil and gas business, 'a robust performance by chemicals and the upturn of plastics and fibres.'

The profits performance was marred by a DM346million slippage in North America. There were several reasons for this, said Strube, many connected with start-up costs for new plants, such as a world-scale polystyrene unit in Altamira, Mexico; launch costs for new drugs; and 'stepped-up inventories' after the acquisition of Sandoz's corn herbicides business. Margins for PS were 'extremely disappointing and worrying', he commented - the sector is 'truly underperforming' in the US, said Strube, but is beginning to strengthen in Europe.

The weak polystyrene margins also dented earnings in the plastics and fibres segment. However, these were offset by improvements in the polyolefins market, Strube commented.

Further earnings boost is set to come from a new process to caprolactam, which the company is developing with DuPont. 'This pioneering technology will set new standards in the caprolactam and nylon-6 market,' Strube predicted - a market worth some DM17billion. The company will not give details of the process, but claims that the costs benefits are 'substantial, although not yet quantifiable,' A world-scale plant is planned for China or another Asian country, to come on-stream in the year 2000.