BASF Aims to Raise Dividend After Posting Higher Third-Quarter Net Income

BASF SE, the world’s largest chemical maker, will resume dividend increases after third- quarter profit jumped by 1 billion euros ($1.39 billion) and the company raised sales and earnings outlooks for 2010.

Net income in the quarter rose to 1.25 billion euros, or 1.35 euros a share, from 237 million euros, or 26 cents, a year earlier, the Ludwigshafen, Germany-based company said today in a statement. BASF reported on Oct. 20 that sales advanced 23 percent to 15.8 billion euros.

Chief Executive Officer Juergen Hambrecht, who steps down next year, said BASF will earn “a high premium” on its cost of capital, allowing the manufacturer to raise the dividend. BASF cut the payout on 2009 earnings, the first reduction in 16 years, after narrowly missing profit targets. It pledged the reduction would be temporary as earnings improve this year.

“With no special effects and a smashing year, it makes sense to give shareholders a little treat,” said Heiko Feber, an analyst at Bankhaus Lampe in Dusseldorf, Germany, who recommends buying the stock. “Since we don’t expect a double dip in the economy, BASF will probably keep up moderate growth next year.”

Shareholders received 1.70 euros a share in the most recent payout, down from 1.95 euros a year earlier. The prediction for the next dividend is 2.05 euros, according to Bloomberg analytics.

BASF rose 0.3 percent to 52.37 euros at the market close at 5:30 p.m. in Frankfurt today. The stock has gained 21 percent this year, valuing the company at 48.1 billion euros.

2010 Forecasts

The company has achieved 600 million euros out of a cost- reduction target of 1 billion euros by 2012, Hambrecht said in a call with analysts. Cash flow will continue to be “strong” in the fourth quarter, he said.

The company said last week that, with “good business development” in the fourth quarter, full-year earnings before interest, taxes and one-time gains or costs will exceed 8 billion euros, an increase of at least 65 percent from the 2009 figure. Revenue is forecast to rise to 63 billion euros from 50.7 billion euros last year. The company said in September that sales growth will be “strong” and predicted in July that earnings would increase “considerably.”

“We are now profiting from the favorable economic environment because we further improved our competitiveness in the crisis and made our portfolio even more cyclically resilient,” Hambrecht said in today’s statement.

Ebit excluding special items surged 70 percent at the chemicals division and 72 percent at the plastics unit as BASF passed on higher raw-material prices to consumers. The Agricultural Solutions division more than tripled profit, boosted by sales in South America.

Hambrecht will be succeeded by Chief Financial Officer Kurt Bock in May after leading the company for eight years. Board member Hans-Ulrich Engel will take over as CFO.

To contact the reporters on this story: Benedikt Kammel in Berlin at bkammel@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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