Tuesday October 30, 03:16 PM
BASF posts third-quarter profit leap, forecasts record year
FRANKFURT (AFP) - BASF (Xetra: 515100 - news) , the world's leading chemicals company, expects another record year after posting a third quarter profit almost double that in 2006, it said Thursday.
The results, which benefitted from purchasess that strengthened the group's core business, allowed BASF to slightly increase its 2007 earnings outlook.
But shares in the company dropped following the announcement, owing to profit taking and a broker downgrade from Sal Oppenheim.
BASF net profit climbed almost 98 percent to 1.213 billion euros (1.747 billion dollars), a group statement said, much better than expected by sector analysts.
That was in large part the result of a German corporate tax cut approved this year, but the various BASF divisions reported positive results as well.
Operating profit before exceptional items rose by 5.6 percent to 1.7 billion euros, in line with a consensus forecast compiled by Thomson Financial News.
BASF sales were 5.0 percent higher at almost 14 billion euros.
Looking ahead, the chemicals group quoted chief financial officer Kurt Bock as saying it was "heading for a record year again," with expected sales "of close to 58 billion euros," compared with 52.6 billion in 2006.
Operating profit before one-off items should now exceed the record 7.257 billion euros set last year, the company said, upgrading slightly its previous outlook that the result would be "at least the record level of last year."
The BASF statement said all segments of the group's activities had contributed to the growth in sales.
"In particular, the businesses acquired last year performed strongly," it stressed.
They included US chemical concerns Engelhard and Johnson Polymers and the construction chemicals arm of the German group Degussa.
Sector results showed that BASF's agricultural products and nutrition unit turned in the strongest sales growth in percentage terms, adding 7.0 percent, with fungicides for South American (SAC.TO - news) soybean cultivation standing out among the strong performers.
Over the first nine months of 2007, BASF sales grew by 13 percent to nearly 43.3 billion euros, while core earnings before special items gained 9.0 percent to 5.9 billion.
Shares in the chemicals giant nonetheless lost 1.34 percent to 97.02 euros in morning trading on the Frankfurt stock exchange, while the DAX index (Xetra: news) of leading stocks had slipped by 0.27 percent overall.
"I see the shares mostly suffering from profit taking mixed with a bit of fear that BASF will not be able to continue the good streak into the fourth quarter and further," a Frankfurt-based analyst said.
Analysts at Sal Oppenheim echoed the concern about BASF's ability to sustain profit levels.
"We see currently more risks regarding a disappointment in coming quarters rather than from positive surprises," the brokerage said as it downgraded its position on BASF to 'neutral' from 'buy'.
The brokerage also doubted whether the group's positive bottom line could be maintained.
"We would not overestimate the positive surprise at the bottom line as this has to be attributed to a one-time gain," it said.
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