BASF Backs 2012 Outlook Despite Profit Falling Amid Destocking

Date : 07/26/2012 @ 2:22AM
Source : Dow Jones News
Stock : Dow Chemical Company (The) (DOW)
Quote : 66.85  0.63 (0.95%) @ 6:30PM

BASF Backs 2012 Outlook Despite Profit Falling Amid Destocking

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FRANKFURT--BASF SE (BAS.XE), the world's largest chemicals company by sales, Thursday confirmed its full-year outlook despite lower second-quarter profit being hit by destocking by customers and stalling demand in China.

"Our customers are continuing to act cautiously and are reducing their inventories, also in expectation of falling prices due to declining raw material costs," Chief Executive Kurt Bock said in a statement, adding the Chinese growth engine has also started to fade.

BASF continues to guide for an increase in sale and earnings on the year in 2012.

After reporting first-quarter earnings in April, BASF expected a stronger second half of the year, with demand mostly coming from emerging markets. It planned to raise prices to offset rising costs and first-quarter margin deterioration.

However, at the end of May, vice chairman Martin Brudermueller said business momentum in Asia including China had been weaker than expected, with the European debt crisis weighing on Asian markets.

Second-quarter net profit came in below analysts' expectations at 1.23 billion euros ($1.49 billion), down 15% on the year, while sales rose to EUR19.5 billion, up 6% on the year, the company said.

The German company's closely-watched adjusted earnings before interest and taxes for the first half year came in largely flat at over EUR5 billion.

HSBC said BASF's latest quarter benefited from a resumption of Libyan oil production, "which mitigates to a certain extent any deterioration in profitability in the core chemical businesses."

BASF's update follows that of other chemicals companies. U.S.-based DuPont Co. (DD) on Tuesday reported a decrease in second-quarter net profit, due to lower volume and adverse currency moves and now expects 2012 adjusted earnings at the lower end of its current forecast range. Sales in DuPont's agricultural unit however rose 13%, and sales in developing markets also showed a solid increase.

Dow Chemical Co. (DOW) reports later on Thursday.

Over the past year, BASF shares have lost around 13% of their value, underperforming the Euro Stoxx Chemicals Index which has shed about 9%.

Write to Nicky Redl at nicky.redl@dowjones.com

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