Thursday April 30, 09:38 AM
Chemical group BASF posts weak earnings
FRANKFURT (AFP) - BASF, the world's leading chemicals group, posted steep drops in first-quarter earnings on Thursday and warned of huge challenges ahead as key clients like the auto sector struggled amid a global recession.
BASF reported a 68-percent drop in first quarter net profit to 375 million euros (499 million dollars) owing to "persistently weak demand."
A gloomy but direct BASF statement said core earnings shed 58 percent to 985 million euros, on sales that lost 23 percent to 12.2 billion euros owing to the economic slump.
Responding to what it called "an extremely difficult environment," BASF said it would eliminate at least 2,000 posts by the end of the year.
BASF employed around 97,000 workers at the end of 2008 and is active in the chemical sector, including plastics and agricultural products, as well as in the exploration and sale of oil and gas.
It had already warned of at least 1,500 job cuts this year, but said Thursday it "will restructure and, where necessary, close or sell plants and sites that cannot ensure the company's long-term competitiveness."
"BASF is facing enormous challenges in 2009," the statement said, adding that demand for chemical products, used widely in the distressed auto sector for example, had shown a "drastic decline" since the start of the year.
It quoted chairman Juergen Hambrecht as saying: "There is currently no sign of a reversal of this trend and we do not consider temporary topping up of inventories in some regions and industries to be signs of a sustainable upturn."
One bright spot was nonetheless seen in the group's agricultural division, which posted higher volumes and prices on strong sales.
The oil and gas unit also posted slightly higher sales as a "drastic fall in oil prices was more than compensated by the increased prices" in natural gas.
Looking ahead, the chemicals giant said that despite the acquisition of two companies, Ciba Holding (Virt-X: CIBN.VX - news) and Revus Energy (Oslo: REVUS.OL - news) , it forecast "a decline in sales compared with 2008 and an even greater decline in income from operations, which will be negatively impacted by integration costs."
Like many other companies however, BASF did not give a detailed outlook for 2009 earnings.
In 2008, its net profit fell by 28.4 percent from the previous year to 2.9 billion euros.
The group said Thursday it would "maintain strict cost and spending discipline and will continue to reduce current assets rigorously" to secure a strong cash flow and ensure the company's "solid financing structure."
Those efforts were expected "to progressively increase earnings by more than one billion euros per year as of 2012," the statement said.
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