BASF maintains good business performance in the third quarter

25 October 2012

• 3rd quarter 2012:
  • Sales up 8% and EBIT before special items up 5% compared with third quarter of 2011
  • Successful business development continues in Agricultural Solutions and Oil & Gas segments
  • Earnings in chemicals business below third quarter of previous year
• Outlook for full year 2012 confirmed: Increase in sales and earnings targeted

After a solid first half, BASF maintained good business performance overall in the third quarter. Sales rose by 8% to €19 billion, particularly due to higher volumes. At just under €2.1 billion, income from operations (EBIT) before special items was 5% above the level of the third quarter of 2011. The higher contribution from the Oil & Gas and Agricultural Solutions segments more than offset lower earnings in the chemicals business (which comprises the Chemicals, Plastics, Performance Products and Functional Solutions segments).

At the presentations of the results, Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE said: “ In the past quarter, the outlook for the world economy has once again not improved and the uncertainty on the international capital markets continues. In China, growth in the third quarter of 2012 has slowed once again compared with the same quarter of the previous year. We see stabilization at the current level in China, but no visible upturn.”

BASF confirms outlook for full year 2012
The company has adjusted some of its expectations for the global economy (previous forecast in parentheses):

• Growth of gross domestic product: 2.2% (2.3%)
• Growth in industrial production: 2.8% (3.4%)
• Growth in chemical production: 2.9% (3.5%)
• An average euro/dollar exchange rate of $1.30 per euro ($1.30 per euro)
• An average oil price of $110/barrel in 2012 ($110/barrel)

BASF does not anticipate an upturn in the global economy or in demand in its chemicals business for the fourth quarter of 2012. “However, we still aim to exceed the 2011 record levels in sales and EBIT before special items,” said Bock. The forecast is supported by the resumption of the crude oil production in Libya and by the company’s successful business with crop protection products. Earnings from the chemicals business in 2012 will not match the level of the previous year.

“In this challenging environment, we are concentrating on our strengths and expanding our business, but we are also keeping an eye on the costs and are continuing to optimize our business processes,” said Bock. For example, at the beginning of this week, BASF Group company Wintershall signed an agreement with Statoil ASA to substantially expand its production of oil and gas on the Norwegian continental shelf. In addition, through the planned acquisition of US-based Becker Underwood, Inc., BASF aims to become one of the leading global providers of technologies for biological seed treatment and biological crop protection. BASF’s strategic excellence program STEP, which was already announced in November 2011, is making good progress. STEP comprises more than 100 projects that are expected to successively lower fixed costs and raise profit margins. From completion of the program in 2015, the company expects an annual earnings contribution of around €1 billion.

Business development in the segments in the 3rd quarter
In the Chemicals segment, sales grew significantly in comparison with the previous third quarter. This was due in particular to sales to Styrolution Group companies in addition to positive currency effects and higher sales volumes. Earnings declined considerably, owing to lower margins as well as to plant shutdowns in the Petrochemicals division.

Sales rose in the Plastics segment, especially as a result of currency effects. In the Polyurethanes division, sales volumes and prices also increased. Despite improved earnings in Polyurethanes, lower margins for polyamide precursors led to a considerable decline in earnings in the segment compared with the same period of the previous year.

Sales in the Performance Products segment were slightly above the level of the third quarter of 2011. This was mainly the result of positive currency effects. Lower volumes and sales prices weakened sales growth, however. Earnings declined as a result of higher costs due to idle capacity as well as increased spending on research and development.

Despite positive currency effects, sales fell in the Functional Solutions segment. This was mostly due to the lower contribution from precious metal trading as a result of reduced volumes and sales prices. Earnings did not match the level of the previous third quarter, particularly because of higher raw material costs.

Sales significantly increased in the Agricultural Solutions segment. The start to the season in South America and fall business in the Northern Hemisphere were both very successful. In addition to improved sales volumes, currency effects also contributed positively to sales development. Earnings were considerably above the level of the previous third quarter thanks to higher volumes.

Sales grew significantly in the Oil & Gas segment. Sales volumes were higher in both business sectors. Greater demand on spot trading markets led to higher volumes in natural gas trading. After the suspension of production in Libya from February to October of the previous year, it was possible to continuously produce crude oil there during the third quarter of 2012. Earnings therefore significantly exceeded the level of the previous third quarter, and net income grew considerably, as well.

Other posted a decline in sales, largely as a result of the divestiture of our styrenic plastics business, which was contributed to the Styrolution joint venture as of October 1, 2011. Earnings in Other declined significantly. In addition to the missing earnings contribution from the styrenic plastics business, the increase in provisions for the long-term incentive program resulting from a higher share price negatively impacted earnings. By contrast, the reversal of provisions for the long-term incentive program in the previous third quarter had led to an improvement in earnings.

Business development in the regions in the 3rd quarter
Sales in Europe were 12% higher than the level of the third quarter of 2011. As a result of the continuous production of crude oil in Libya, volumes in the Oil & Gas segment increased considerably. The Chemicals segment also posted significant sales growth, which was largely attributable to portfolio effects. EBIT before special items was significantly boosted thanks to the higher contribution from the Oil & Gas and Agricultural Solutions segments: At €1.4 billion, this represented a year-on-year increase of €214 million.

In North America, sales decreased by 9% in U.S. dollars and rose by 3% in euro terms. This development was supported by positive currency effects and demand-driven higher sales volumes in the Plastics segment. Lower sales prices weakened sales growth, however. At €229 million, earnings were €72 million lower than in the third quarter of 2011 particularly owing to unscheduled plant shutdowns in the Petrochemicals division.

Sales in Asia Pacific fell by 6% in local-currency terms while growing by 5% in euro terms. Positive currency effects were able to more than offset declining sales prices. Sales volumes in the region improved thanks primarily to a considerable volumes growth in the Chemicals segment. Earnings declined by €23 million to €236 million despite the significantly increased contribution from the Polyurethanes division. This was mostly due to higher depreciation and amortization on investments and increased spending on research and development.

In South America, Africa, Middle East, sales increased by 1% in local currency terms and 3% in euro terms. Thanks to high sales volumes and currency effects, the Agricultural Solutions segment made a substantial contribution to sales growth. By contrast, sales declined in the Catalysts division and the Oil & Gas segment. At €157 million, earnings were €13 million below the level of the previous third quarter, largely as a result of lower earnings contribution from the Oil & Gas segment.

About BASF
BASF is the world’s leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. We combine economic success, social responsibility and environmental protection. Through science and innovation we enable our customers in almost all industries to meet the current and future needs of society. Our products and system solutions contribute to conserving resources, ensuring healthy food and nutrition and helping to improve the quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF posted sales of about €73.5 billion in 2011 and had more than 111,000 employees as of the end of the year. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com.