BASF Posts Solid Earnings in Difficult Business Environment
March 6, 2009
LUDWIGSHAFEN, Germany – In 2008, BASF reported a sales increase of 8 percent compared with 2007, to EUR 62.3 billion, despite a drop in the fourth quarter. This was primarily due to higher prices in all divisions.
Income from operations (EBIT) before special items was just under EUR 6.9 billion at the end of the year, 10 percent lower than the record amount posted in 2007. In 2008, BASF again earned a high premium of EUR 1.6 billion on its cost of capital, compared with EUR 2.9 billion in 2007.
BASF is acting quickly and decisively to combat the effects of the global economic crisis. Production capacities and investments worldwide are being tailored to the drastic decline in demand, and the implementation of restructuring and efficiency programs is being accelerated.
BASF’s Chairman Jürgen Hambrecht explained, “With our diversified portfolio, we are far better positioned in this recession than other companies in the chemical industry. Strong businesses such as crop protection, nutrition, cosmetics, hygiene, as well as oil and gas, act as stabilizing factors. Right now it is particularly important that we are very solidly financed and have one of the best ratings in the chemical industry. Our strengths include a high free cash flow, which, as in previous years, significantly exceeded EUR 2 billion in 2008.”
In order to maintain the company’s long-term competitiveness, BASF is accelerating its ongoing efficiency and restructuring programs and will close less-profitable plants and also sites throughout the BASF Group. This applies, for example, to coatings sites in the United States, Asia and Europe, and to plants for plastics precursors in Asia.
“2009 will be a year of unprecedented challenges,” said Hambrecht. “Following the dramatic drop in our global business in the fourth quarter of 2008, demand for chemical products has not picked up since the start of 2009. A reversal of the trend is not yet in sight. On the contrary, the situation in our sales markets is worsening, and inventory levels in the value chains are still too high. As a result, the chemical industry is continuing to shrink.”
Hambrecht stated that all forecasts are currently subject to great uncertainty. BASF expects a decline in sales compared with 2008 and an even greater decline in income from operations, which will be negatively impacted by integration costs. The company nevertheless aims to at least earn its cost of capital and keep its dividend stable.