BASF Optimistic About 2015

BASF today reported 2014 sales rose .5% to €74.3 billion ($84 billion at current exchange rates). EBIT before special items rose 4% to €7.4 billion, while earnings per share increased 7.5% to €5.61. Looking ahead, the company expects a slight increase in 2015 sales, but company brass warned that there could be volatility in the new year.

“The outlook for the 2015 business year is subject to significant uncertainty,” warned Dr. Kurt Bock, chairman, BASF SE, at the annual press conference in Ludwigshafen. “Oil and raw material prices are volatile, as are currencies; the emerging markets are growing more slowly; and the global economy is being dampened by geopolitical conflict. For 2015, we nevertheless anticipate somewhat stronger growth in the global economy, industrial production and the chemical industry than in 2014.”

One reason for this optimism is the lower price of oil. For 2015, the company assumes the following economic conditions (previous year figures in parentheses):

• Global economic growth: +2.8% (+2.5%)
• Growth in global chemical production (excluding pharmaceuticals): +4.2% (+4.0%)
• An average euro/dollar exchange rate of $1.20 per euro ($1.33 per euro)
• An average oil price (Brent) of $60 to $70 per barrel ($99 per barrel)

“The global economy will continue to face substantial risks. In this volatile and challenging environment, we want to perform well and increase sales slightly in 2015,” said Bock.

EBIT before special items in 2015 will likely match the previous year's level. The company expects considerably larger contributions from Performance Products, Functional Materials & Solutions and Agricultural Solutions. EBIT before special items in the Chemicals segment is likely to decline slightly because of expenses for starting up several plants. The earnings contribution of the Oil & Gas segment is expected to decrease considerably due to the lower price of oil.

In 2014, sales matched the level of the previous year (2013: €74.0 billion). Sales volumes increased in all segments in 2014. Overall volumes rose 4%. Prices fell 3%, largely due to significant decreases in oil and gas prices. Negative currency effects dampened sales in almost all divisions.

At €15.5 billion (approximately $20.6 billion), sales for companies headquartered in North America were up by 6% compared with 2013. In dollar terms, this was an increase of 7%. Sales in the Chemicals segment rose considerably, thanks in particular to higher volumes for cracker products. The Functional Materials & Solutions and Agricultural Solutions segments also contributed to sales growth. EBIT before special items rose by €27 million to €1.6 billion (approximately $2.1 billion).

“The main reason for this was a significantly larger, margin-driven contribution from the Petrochemicals division. We were able to increase earnings in the Agricultural Solutions segment, as well,” said Hans Engel, vhairman and CEO of BASF Corporation.  “Overall, we grew profitably in North America in 2014. We will continue to cooperate closely with our customers and to focus on innovation, attractive market segments and cross-business initiatives. We also will continue to invest in North America in light of the attractive growth prospects.”

For the full year, sales in the Chemicals segment were flat at €17.0 billion. Falling prices in all divisions were offset by higher sales volumes, especially in the Petrochemicals division. At €2.4 billion, EBIT before special items surpassed the level of 2013 by €185 million. This was predominantly on account of substantially larger contributions from the Petrochemicals and Intermediates divisions. The Monomers division, however, posted a considerable, margin-related decline in earnings, according to BASF.