BASF SE (BAS) posted first-quarter profit that beat analyst estimates as better-than-predicted orders for herbicides and fungicides cushioned lower demand for paper and pigment additives at the biggest chemical company.
Earnings before interest, tax and one-time items increased 10 percent to 2.21 billion euros ($2.88 billion), the Ludwigshafen, Germany-based company said today in a statement. The average estimate of analysts in a Bloomberg survey was for 2.09 billion euros. The stock gained as much as 3.3 percent.
Chief Executive Officer Kurt Bock’s purchase of seed- treatment supplier Becker Underwood Inc. last year helped boost results while earnings at the division that makes ingredients for shampoo and vitamins need to improve, the company said today. The CEO is also cutting 940 jobs to counter increased competition in areas such as additives used in construction and plastics.
“There are big differences if you look at the segments,” said Oliver Schwarz, a chemical analyst at MM Warburg. “Profit in agricultural chemicals was significantly stronger than expected. In the performance-products area, there is a lot to do before it reaches the level BASF would like it to be at.”
The shares gained as much as 2.33 euros, the biggest jump in more than seven months, to 72.33 euros and were up 2.8 percent as of 12:30 p.m., valuing the company at 66 billion euros. Before today, the stock dropped 1.6 percent this year, while the Bloomberg Europe Chemicals Index gained 0.3 percent.
Sales rose 4.8 percent to 19.7 billion euros in the first quarter, beating a 19.4 billion-euro estimate.
BASF’s agricultural unit increased profit by 19 percent as customers in Europe, North America and China ordered more fungicides. U.S. rival DuPont Co. (DD) also beat estimates in the three months through March as profit from crop seeds and pesticides hit a record.
Profitability for petrochemicals improved after BASF passed on higher raw-material prices to customers, it said today. The chemicals unit, which posted earnings that were 17 percent higher, benefited from stronger demand for intermediates such as butanediol, used in technical plastics, solvents and elastic fibers.
Earnings before special items at the performance-products unit dropped 16 percent. Chief Financial Officer Hans-Ulrich Engel said today the company is still assessing potential job cuts at the division after announcing 500 positions will go earlier this week. Global product management for pigments and resins is being pooled in Hong Kong and leather and textile research and development will be moved to Shanghai, BASF said.
“Changes are often uncomfortable and awkward at the beginning,” Bock said today at the company’s annual shareholder meeting in Mannheim. “More standardization and new competitors have changed the market significantly. That’s especially the case for pigments and plastic additives as well as water, leather and textile chemicals.”
About 400 positions are being cut at the construction chemicals business, which is part of the unit called functional materials and solutions. Earnings at the division, which also makes coatings and plastics, dropped 7 percent in the quarter.
Rival Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemical maker, said earlier this month it plans to cut about 1,050 positions and will close some assets in Europe as a response to diminished demand. Clariant AG (CLN) Chief Executive Officer Hariolf Kottmann has said the Swiss company’s headcount will probably drop to about 16,000 after planned unit sales from 21,200 at the end of 2012.
BASF, reporting under new accounting standards for the first time, is sticking to a full-year forecast for sales, and earnings to rise from last year’s restated 72.1 billion euros and 6.6 billion euros respectively.
“BASF appears to be reacting quickly and decisively to tougher conditions in some segments with acceleration in cost cutting and focus on cash management evident,” Andrew Benson, an analyst at Citigroup, said in a note to clients today. “Its ability to achieve its aim of Ebit growth this year is likely to hang on whether improved volume growth momentum returns during the second half of 2013.”
The chemical maker also reiterated medium-term profit and sales targets. Ebitda will probably rise to about 14 billion euros on sales of 80 billion euros in 2015 and increase to 22 billion euros in profit on revenue of 110 billion euros in 2020.
“It’s ambitious and demands a big commitment,” Bock said today about the company’s targets. “We will have to roll up our sleeves.”
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