BASF: “considerable” Q2 earnings growth, but Nutrition & Health sales stall

27 Jul 2017 --- BASF Group has announced that its second quarter sales rose by 12 percent to €16.3 billion (US$19.11 billion) compared with the same period in 2016. The group states that this was largely attributable to higher prices and volumes. Amid higher raw material costs, the company raised sales prices by 7 percent; this was mainly driven by higher prices in the Chemicals segment. Sales volumes increased by 3 percent. Currency effects had a positive impact on sales and, like portfolio effects, accounted for a 1 percent increase.

However, sales in the Nutrition & Health division were considerably below prior second-quarter levels, mainly due to portfolio effects. The slight decline in sales prices was mostly a result of decreased vitamin prices in the animal nutrition business. Currency effects and higher volumes in our flavor and fragrance business, as well as in human nutrition, provided support for sales development.

The company reports that EBIT before special items fell considerably compared with the second quarter of 2016. This was mostly on account of lower margins in the animal nutrition business as well as higher fixed costs arising from the gradual startup of new plants.

Speaking of the group’s overall second quarter results, Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE, says, “The positive demand trend continued in the second quarter of 2017. We increased our year-on-year sales volumes for the fifth consecutive quarter. Compared with the same quarter of last year, we considerably improved our sales and earnings.”

Outlook for the year 2017
Because of the positive macroeconomic development in the first half of the year, BASF reports that it now takes a somewhat more positive overall view of the underlying conditions for 2017. The company’s expectations for the global economic environment in 2017 are as follows (previous forecast in parentheses):

• Growth in gross domestic product: 2.5 percent (2.3 percent)
• Growth in industrial production: 2.5 percent (2.3 percent)
• Growth in chemical production: 3.4 percent (unchanged)
• Average euro/dollar exchange rate of US$1.10 per euro (US$1.05 per euro)
• Average Brent blend oil price for the year of US$50 per barrel (US$55 per barrel)

“We continue to expect a considerable increase in sales for the full year – by at least 6 percent. Given the considerable earnings increase in the first six months of the year, we now expect a considerable increase in EBIT before special items of at least 11 percent for 2017,” Bock says.