UPDATE: BASF Sets Ambitious Guidance For 2012, Eyes Emerging Markets
February 24 2012 - 3:45AM
Dow Jones News
BASF SE (BAS.XE), the world's largest chemicals company by
sales, Friday predicted higher sales and adjusted operating
earnings this year, driven by growth in emerging markets and
recovery in mature markets as 2012 progresses.
The company expects total sales this year to exceed 2011's
record level and continue rising in 2013, provided the crisis in
the euro zone doesn't intensify and the upswing in North America
continues.
"In the first half of 2012, we will likely not achieve the high
levels of the first two quarters of the previous year. For the
second half, we expect to surpass the levels of the same period of
the previous year," Kurt Bock, BASF's chief executive, said in a
statement.
Both sales and net profit for last year's final quarter beat
analysts' predictions, as the company slimmed costs and raised
prices during the recent slowdown. Revenue came in at EUR18.06
billion, up 10% from a year earlier. Net profit rose 2.8% to
EUR1.13 billion.
Still, adjusted earnings before interest and taxes suffered due
to the sovereign debt crisis, falling about 14% on the year to
EUR1.51 billion, short of the EU1.53 billion analysts
predicted.
"Customers were more cautious in their ordering, reduced their
inventories and put off orders in expectation that the economy
would decline and prices could possibly soften," the company
said.
Lower margins as a result of weak demand and increased raw
material costs burdened its two main divisions, plastics and
chemicals. Although the company expects chemicals sales to be
higher on the year in 2012, pressure on margins means it expects
the division's earnings to be lower.
The sovereign debt crisis and market uncertainty also hurt
earnings recently reported by peers. Dow Chemical Co.'s (DOW) and
Saudi Basic Industries Corp. (2010.SA), or Sabic's, fourth quarter
earnings fell short of expectations as the impact of the sovereign
debt crisis hurt demand. E.I. DuPont de Nemours & Co.'s (DD)
profit fell 0.8% in the fourth quarter due to weaker volumes.
BASF Friday warned uncertainties due to the sovereign debt
crises, in particular in Europe and the U.S., will continue to
dampen growth prospects in 2012, and said positive impetus for the
chemical industry will again mainly come from emerging markets.
Analysts welcomed BASF's results, DZ Bank described both
earnings and guidance as positive. Heiko Feber of Bankhaus Lampe
attributed the positive sales and adjusted EBIT surprise to the oil
and gas division, as Libya production resumed slightly more
strongly than the market was expecting.
At 0806 GMT, BASF shares traded 2.4% higher at EUR66.15, while
Germany's DAX traded up 1%.
Over the past 12 months, BASF shares have gained around 9% in
value, outperforming the European Chemicals stock index, which has
gained about 4.4%.
- By Harriet Torry, Dow Jones Newswires: +49 69 29725 511:
harriet.torry@dowjones.com