Levity in Ludwigshafen
15 Jan 2000
`One of BASF's best years' was how chairman Jurgen Strube described 1996. Sales, cash flow, pre-tax earnings and net income all reached record levels, thanks to a mixture of acquisitions and divestments to `strengthen core skills' and stability of business across the company's regions. The company is hoping to break the DM50billion sales barrier in the coming year.
The key to the performance was the increase in group sales, up 5.5 per cent to DM48.8billion. This `influenced earnings at all levels,' commented finance chief Max Dietrich Kley. Income from operations jumped 6.7 per cent to DM4.3billion, helped by favourable exchange rates.
`A survey of the regions again confirmed that the days of uniform economic cycles are over,' commented Strube. This gave the company the opportunity to use buoyancies in one region to offset slackness in another. For example, Strube noted, the company had increased its exports, especially to Asia, to counter the continuing weakness of the German economy. `Averaged over the year, BASF Aktiengesellschaft's export rate reached 69.4 per cent,' he said. `Yet another record.'
The company's biggest money-spinner was its chemicals division, which generated income of DM1.7billion and a return on operational assets of 37.7 per cent. `We are proud of the fact that we can turn in attractive returns from chemicals even outside boom phases,' Strube said. Earnings fell in plastics and fibres, however, because of `unsatisfactory' prices for all commodity plastics. Raising revenues here is `a particular challenge' for the current year, he added.
But the company's attention has been fixed more firmly on the health and nutrition sectors, because of their `growth potential and non-cyclical aspect.' A majority share in Japanese drugs research firm Hokuriku Seiyaku `laid a firm foundation for developing and marketing our products in Japan.' Acquisitions in France and the Netherlands strengthened the generics operation. Health and nutrition quadrupled its contribution to the operating result with income of DM781million.
The good year has led to increasing investment, Strube noted. Capital investment rose by over 20 per cent, to DM3.6billion; a further boost, to DM3.8billion, is planned for this year. R&D expenditure reached DM2.3billion, with DM220million going on application-oriented basic research. With orders `increased significantly' and a cyclical upturn on the horizon, the mood in Ludwigshafen is more upbeat than it has been for some years.
