BASF Profit Beats Estimates on Auto, Agro Industry Demand

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BASF CEO Kurt Bock
BASF SE Chief Executive Officer Kurt Bock said, “Our chemicals and our crop protection businesses performed very successfully; earnings in these segments increased significantly,” . Photographer: Daniel Roland/AFP via Getty Images

BASF SE reported first-quarter profit that beat analyst estimates helped by higher demand from the automotive and agricultural industries as well as a lower euro.

Earnings before interest, tax and one-time items fell 2 percent to 2.07 billion euros ($2.3 billion), the Ludwigshafen, Germany-based company said today. Analysts had predicted 2.02 billion euros, according to a Bloomberg survey.

The world’s largest chemical maker, celebrating its 150-year anniversary this year, is sticking to a goal to increase sales and match earnings from last year. Chief Executive Officer Kurt Bock said today that earnings will be driven by the specialty chemicals segments, which supply the automotive, construction and cosmetics industries.

“BASF has produced a solid start to the year with chemicals and agriculture helping to offset an expected decline in oil and gas,” Martin Evans of JP Morgan Cazenove said in a note to investors. Evans rates BASF underweight.

The shares gained as much as 2.3 percent to 91.12 euros in Frankfurt and traded at 90.82 euros as of 9:09 a.m. local time. BASF shares have gained 30 percent this year, outpacing the 16 percent gain on Germany’s benchmark DAX index. The company’s market value is 83 billion euros.

Sales in the first quarter rose 2.8 percent to 20.1 billion euros, also beating an analyst estimate of 19.4 billion euros. Net income dropped 20 percent to 1.17 billion euros amid charges for BASF’s long-term incentive plan for employees.

Sales growth “was mainly due to increased volumes and positive currency effects,” the company said.

Guidance Steady

Chief Financial Officer Hans-Ulrich Engel told analysts that there’s “no room to change the guidance” when prompted on the subject. The first quarter was volatile with demand increasing in March, which was surprising because it’s usually the other way around, he said.

“We stick to our guidance and we feel good with that,” Engel said today on the conference call with analysts.

The German company is still evaluating whether it will build a facility to convert methane to propylene in the U.S., taking advantage of cheaper shale gas. The project would be BASF’s largest single-plant investment to date, with a budget of more than 1 billion euros, and it has selected Freeport in Texas as a potential site, it said last month.

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