BASF Sees 2014 Earnings Gain as Quarterly Profits Rise
BASF SE (BAS) predicts annual earnings to rise this year after the world’s biggest chemical maker posted fourth-quarter profit that beat analyst estimates on increased demand for catalysts and coatings from the car industry.
“We do not expect strong tailwinds this year,” Chief Executive Officer Kurt Bock said in today’s statement. “Nevertheless, we are cautiously optimistic with regards to global economic development.” For the global chemical industry, he predicts growth rates comparable with the previous year’s level and higher growth in industries such as the transportation, consumer goods and electronics industries.
Bock’s predicts annual earnings before special items to rise “slightly” even though the Ludwigshafen, Germany-based company is divesting a gas trading unit mid-year. Acquisitions such as seed-treatment supplier Becker Underwood and oil assets in Norway will more than compensate for the loss of earnings along with increased demand from the auto and construction industries. Bock has also accelerated a savings drive, announcing 1,400 job cuts in the last 12 months.
“The outlook is certainly pleasing,” said Ulle Woerner, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart. “Even a slight increase is good news.” Woerner rates BASF buy.
A cost-cutting program boosted earnings by an accumulated 600 million euros ($825 million) by the end of last year, BASF said today. The manufacturer is restructuring its paper chemicals business, cutting 250 jobs by the end of 2015. Declining demand for paper has led to too much capacity in the European market, it said in January.
Earnings before interest, tax and one-time items rose 18 percent to 1.45 billion euros in the fourth quarter. The average estimate of analysts in a Bloomberg survey was 1.34 billion euros. Bock is working toward an operating profit target of 22 billion euros by the end of the decade.
The stock gained as much as 0.7 percent to 83.80 euros in Frankfurt trading and was little changed as of 9:24 a.m. local time. Before today, the stock had gained 7.5 percent this year, valuing the company at about 76 billion euros.
Sales rose 0.9 percent to 18.1 billion euros in the quarter, compared with a 18.2 billion-euro analyst estimate, hurt by a stronger euro.
Revenue for the full year will probably decline “slightly,” BASF said today. While the planned exit of gas trading and storage in the middle of the year will reduce sales “considerably,” some of that loss will be mitigated by growth in fungicides, herbicides and chemicals.
BASF is transferring its gas trading unit to OAO Gazprom (OGZD) in an asset swap and in return will receive stakes in two Siberian oil fields.
Quarterly profit growth was fastest at the agricultural solutions business, with earnings more than doubling, helped by the purchase of Becker Underwood. The oil and gas unit increased profit by 31 percent while performance products posted an 18 percent gain.
The company said on Feb. 20 it will propose an annual dividend of 2.70 euros, up from 2.60 euros a year ago.
BASF’s supervisory board will also propose former CEO Juergen Hambrecht as chairman at the company’s annual shareholder meeting in May, it said last week. The board is also suggesting British citizen Alison Carnwath for the chemical maker’s board for the first time. Current chairman Eggert Voscherau, 70, and Max Dietrich Kley, 73, are not available for re-election.
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