Bracing for tough times
15 Jan 2000
BASF Group has announced financial figures for 1998 showing a slight decrease in net sales overall; sales to third parties in the UK, excluding oil and gas and information systems, declined by 12 per cent to £774million.
Jurgen Strube, BASF chairman, reported that after excellent 1Q and 2Q results the worldwide business climate led to worse results for the second half of the year. The overall gross return on assets was below target at 11 per cent. Most of the decline in sales was due to the impact of lower crude oil prices, he said, although performance in the chemical products sector also contributed to the decline in sales of 6 per cent over the year.
By sector, health and nutrition showed an increase in income by 10 per cent for the year; colorants and finishing products raised earnings by a third despite declining sales; similarly plastics and fibres earnings were up by a half. In contrast to these figures oil and gas earnings were sharply reduced. Chemicals remained the top income generator with a return on operational assets of 26 per cent. Performance was worse in the fourth quarter.
Across the world markets earnings in the NAFTA region rose by over 50 per cent due to new products, lower fixed expenses and costs. The crises in Southeast Asia/Japan and South America resulted in gluts and lower prices in the European and North American markets, with associated depressed sales and reduced margins.
Expectations for 1999 remain buoyant; sales are expected to be similar to 1998, although earnings are expected to decline. BASF expects to be able to negotiate these periods due to its speed of response to opportunities, innovation, recent cost-optimisation and the company's `Verbund' integration strategy.
In the UK the health and nutrition sector performed well, largely due to a strong performance from crop protection products. Turnover in the plastics and fibres and chemicals sectors were down by 12 and 15 per cent respectively, largely due to poor international market conditions.
* BASF has announced plans to build a new butanediol (BDO) plant in North America using ester hydrogenation technology. The plant will have an annual capacity of 100,000tpa, giving BASF an annual capacity of 310,000tpa. In addition to this BASF has announced a new 100,000 tpa butanediol plant as a joint venture with Petronas, the Malaysian state-owned company.
