BASF Profit Misses Estimates, Targets Now More Difficult

BASF SE (BAS), the world’s biggest chemical company, posted profit that missed analyst estimates and said meeting annual targets looks more difficult than at the start of the year amid pressure on prices.

Earnings before interest, taxes and one-time items fell 5.4 percent to 1.83 billion euros ($2.42 billion), the Ludwigshafen, Germany-based company said today. Analysts predicted 1.99 billion euros, on average. The shares fell the most in most in more than 2 1/2 years in Frankfurt trading.

Chief Executive Officer Kurt Bock, who is already cutting 940 jobs, said today he sees potential for annual cost cuts to exceed the 1 billion euros a year planned for the end of 2015. The company, which is shifting investment to Asia, pared its outlook for growth of the global economy as well as industrial and chemical production.

“It doesn’t look that pretty,” said Oliver Schwarz, a chemical analyst at Warburg Research in Hamburg, who rates the stock hold. “At the chemical sectors, prices had a negative influence. You can see in the BASF numbers that the outlook is becoming more difficult.”

BASF stock fell as much as 5 percent, the biggest intraday drop since November 2011, to 66.37 euros and it was down 3.2 percent at 66.65 euros as of 10:05 a.m. local time. It’s dropped 12 percent in six months in Frankfurt, cutting the market value to 61 billion euros.

‘Volatile’

Deflation in chemicals and slower growth in China will likely lead analysts to lower 2013 earnings estimates for BASF by 5 percent to 10 percent, JPMorgan Cazenove analyst Martin Evans said.

Sales rose 2.9 percent to 18.4 billion euros in the three months through June, in line with analyst estimates. Net income fell 4.2 percent to 1.16 billion euros, with earnings per share at 1.26 euros.

“We expect a flat development in the second half,” Bock said in a Bloomberg television interview today. “There is no real underlying growth dynamic that we would see right now.” The chemical maker has seen no pick-up in demand in July, which will probably continue into August, the CEO said.

BASF, reporting under new accounting standards for the first time in 2013, 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.

Outlook Dims

The German company, which ties its profit forecasts to economic growth, now expects gross domestic product to increase 2 percent instead of 2.4 percent. It also pared predictions for industrial production growth to 2.7 percent from 3.4 percent and chemical production gains to 3.1 percent from 3.6 percent.

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.

BASF will invest 10 billion euros in the Asia-Pacific region, shifting research and procurement there, to help boost profitability, deputy CEO Martin Brudermueller said in June. The money, of which about 80 percent may come from BASF and the rest from partners, will be partly used to expand chemical sites in Nanjing, China and Kuantan, Malaysia, he said.

“The good old times of relatively easy growth in China are over,” Bock said today in the television interview. “We are working very hard on our cost base.”

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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