BASF optimistic about '04 outlook

Related tags Chemical industry Basf

German chemicals giant BASF has beaten its own sales and earnings
forecasts for 2003, prompting chairman Jurgen Hambrecht to suggest
that the sector may be due for something of a recovery this year,
writes Phil Taylor.

As the world's largest chemical company BASF is considered a bellwether for the industry, and analysts welcomed its assessment that the global economy seems to be improving.

Group sales were up 3.6 per cent to €33.36 billion - even factoring in the oft-lamented effect of the weak dollar compared to the euro - with operating earnings up marginally at €2.66 billion.

And Hambrecht noted that rising sales volumes in the fourth quarter (by 6.5 per cent to €8.54 billion), as well as encouraging sales trends in the first two months of this year, pointed to better things ahead.

"Throughout the world, the economy seems to have bottomed out,"​ said Hambrecht, adding that the growth markets in Asia and the US are fuelling the global recovery process.

But although the number two vitamin maker saw turnover in its Agricultural Products and Nutrition division rise 7.5 per cent to €3.18 billion last year, the fine chemicals segment of this division - which includes BASF's activities in nutrition and cosmetic ingredients - saw sales fall 6.3 per cent to €1.85 billion, adversely impacted by falling sales to North America because of the weak dollar.

The group will continue with its expansion of vitamin production. A new 40,000 metric ton plant for citral in Ludwigshafen is expected to make the aroma chemical the key component in vitamin A and E production as well as carotenoids. The firm also opened a new B2 production facility in Korea last year, using a more cost-efficient process.

Hambrecht said that BASF is expecting slightly higher sales and profits in 2004, resting on its assumption that crude oil used as a raw material would have an average price of around $28 a barrel in 2004 and continued downward pressure on the dollar.

Restructuring progress

Meanwhile, BASF has completed the first phase of its restructuring drive in North America aimed at reducing fixed costs by $250 million annually by 2006 and the loss of 1,000 jobs. The completion will lead to cost savings of $100 million in 2004, said the company.

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