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BASF: Weathering the storm (part 1)
Ludwigshafen (ots) - - All segments post positive earnings - Product prices and margins under pressure - Higher earnings in Oil & Gas - Earnings in 2001 likely to be lower than in 2000 BASF has continued to weather difficult economic conditions. All of BASF's segments posted positive earnings before special items in the second quarter of 2001.
The Oil & Gas segment was particularly successful: Here, sales in the second quarter increased almost 30 percent compared with 2000. Income from operations before special items increased by more than 50 percent to EURO 378 million.
In the Agricultural Products & Nutrition segment, second-quarter sales in the Agricultural Products division were up more than 40 percent and income from operations before special items climbed almost 17 percent to EURO 133 million compared with the same period in 2000. A look at the results of the first half of 2001 shows the strength of BASF's expanded agricultural products business: Both sales and income from operations almost doubled compared with the first half of 2000.
Chemical businesses are particularly hard hit by the currently weak demand and the volatile prices for raw materials. Contrary to previous estimates that the year's average price for Brent crude oil would be around $25 per barrel, BASF was confronted with prices that were up to $5 per barrel higher in the first half of the year. As a result, the prices of naphtha and other important raw materials were very high. Unusually volatile naphtha prices are continuing to put BASF's margins under pressure.
Extraordinary efforts needed to achieve financial goal
From the basis of current economic conditions, BASF will achieve its ambitious financial goal of increasing its income from operations on the basis of ongoing business before special items by an average of 10 percent per year in 2000 through 2002 only through extraordinary efforts, according to Dr. Jürgen F. Strube, Chairman of the Board of Executive Directors of BASF Aktiengesellschaft. At the same time, he said, a significant economic upturn in the majority of OECD countries by no later than the turn of the year will be necessary. Under the current conditions of volatility we have to accept that the good full-year results we achieved in 2000 will not be reached this year," said Strube.
BASF's long-term goal is adding value through growth and innovation. To achieve this goal, BASF's Board has implemented a series of coordinated programs and initiatives.
As a result of these measures, BASF wants to achieve annual cost advantages of EURO 400 million from the streamlining of its organization globally. BASF expects to save an additional EURO 160 million by the end of 2002 by further optimizing its global procurement of technical goods and services. Site and plant closures will lead to cost savings of EURO 190 million. In addition, BASF will reduce capital expenditures in 2002 by EURO 400 million in line with the changed expectations in the market.
In addition to the measures and closures it has already announced, BASF intends to reduce its global workforce by a further 1,200 in the coming 18 months. The number of job reductions will therefore total 4,000.
To implement this package of measures, BASF recorded special items of almost EURO 450 million in the second quarter. These were related mainly to current and future site and plant closures as well as accelerated restructuring. In particular, EURO 126 million are associated with the site in Birkenhead, United Kingdom, which will not be rebuilt following a fire. Well positioned in a weak economic environment In the past months, BASF has made many changes to its portfolio. These include the expansion of its agricultural products and vitamins businesses, the sale of its pharmaceuticals business, as well as the transfer of its polyolefins and textile dye activities to joint ventures. For a meaningful comparison of BASF's business development, it is necessary to look at "ongoing business before special items," explained Strube.
This is where BASF's progress becomes apparent and shows that the company is in a relatively good position: Sales from ongoing business in the second quarter increased 7 percent over the same period in 2000. Second-quarter income from operations on the basis of ongoing business before special items was EURO746 million. Although this is a decline of 15 percent compared with the relatively good quarter of 2000, it is nevertheless an indication of BASF's earnings power in a weak economic environment.
Strube does not expect the economy situation to improve until next year. "Our goal is sustainable success and we know how to achieve it. We will grow faster than the market, and following our long-term strategy, will be more profitable than most of our competitors," said Strube.
BASF is a transnational chemical company that aims to increase and sustain its corporate value through growth and innovation. The company's product range includes high-value chemicals, plastics, colorants and pigments, dispersions, automotive and industrial coatings, agricultural products and fine chemicals as well as crude oil and natural gas. BASF's approach to integration, known in German as "Verbund," is one of its particular strengths, ensuring cost leadership and a unique competitive advantage. With sales of about EURO 36 billion (circa $34 billion) and a workforce of 103,000 employees in 2000, BASF is one of the world's leading chemical companies. BASF acts in accordance with the principles of Sustainable Development. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), Zurich (BAS), Paris (BA) and New York (BF). The company's Internet address is www.basf.com. Information on BASF's Half-Year Press Conference can be found on the Internet at: English: www.basf.de/pcon German: www.basf.de/pk You can download photos of BASF from the Internet at: www.basf.de/pressphotos. Forward-looking statements
This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF's Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this release. ots Original Text Service: BASF Internet: http://www.presseportal.de Contact: Michael Grabicki Tel. +49 621 60-99938 Fax +49 621 60-20129 E-mail: michael.grabicki @basf-ag.deOriginal-Content von: BASF SE, übermittelt durch news aktuell