BASF: Shaping the future in the crisis – confident for 2010
- Fourth quarter 2009:
- Sales up 2.9 percent, EBIT before special items up 19 percent compared with third quarter of 2009
- Sales down 8 percent, EBIT before special items up 181 percent compared with fourth quarter of 2008
- Full year 2009:
- Sales €50.7 billion (minus 19 percent compared with 2008)
- EBIT before special items €4.9 billion (minus 29 percent compared with 2008)
- Successful measures to increase efficiency and reduce costs
- Cash flow at record high
- Goal of earning cost of capital missed only narrowly due to high cost of Ciba integration
- Expectations for full year 2010:
- Slow and uneven recovery of global economy
- Significant rise in earnings
- Premium on cost of capital earned again
Ludwigshafen, Germany – February 25, 2010 – BASF has demonstrated its strength in the global economic crisis and has created room to actively shape its future by acting quickly and decisively: through the successful integration of Ciba, by further increasing research and development expenditures, and by investing in growth markets. “We have shown that we have the right strategy. We are therefore confident that we will succeed in further strengthening BASF’s leading position,“ said BASF’s Chairman Dr. Jürgen Hambrecht at the company’s Annual Press Conference.
The capital market has recognized BASF’s solid performance and clear strategy. Following a difficult start, BASF’s share price developed well in the course of 2009. With an increase of 57 percent, or 67 percent with dividends reinvested, BASF shares performed considerably better in 2009 than the averages for the DAX 30 and EURO STOXX 50 indices.
After the dramatic drop in late 2008 and the further decline at the beginning of 2009, the capacity utilization of BASF’s plants was at a historic low in large parts of the business. Demand recovered over the course of the year, especially in Asia. Thanks to quick and decisive measures to adjust capacities and increase efficiency, BASF was able to stabilize and improve earnings from quarter to quarter.
In 2009, sales declined by 19 percent to €50.7 billion. All segments posted lower sales with the exception of Performance Products and Agricultural Solutions.
Income from operations (EBIT) before special items fell by 29 percent to €4.9 billion. The Plastics segment improved earnings slightly, while Agricultural Solutions even achieved a new record. Earnings declined in the remaining segments, in some cases considerably.
Overall, BASF fell just short of achieving its goal of earning a premium on its cost of capital due to the costs for the integration of Ciba.
A solid balance sheet and financial strength have always been traditional strengths of BASF. Cash provided by operating activities rose further by €1.3 billion to almost €6.3 billion – a new record. This was primarily due to the company’s success in reducing net working capital. Free cash flow – after deduction of payments related to property, plant and equipment and intangible assets – was also very high at €3.8 billion. Despite the Ciba acquisition, BASF still has a very solid equity ratio of 36 percent.
Outlook full year 2010: Significantly higher EBIT expected
In 2010, BASF expects global industrial production to grow by just under 5 percent, albeit from a very low level. “The slow recovery is continuing. The fourth quarter of 2009 was encouraging and gives us grounds for confidence. The worst is behind us, even though dark clouds remain. 2010 will be a transitional year with uneven development from region to region. Overall, there are no signs of a self-sustaining, long-term recovery,” said Hambrecht.
Nevertheless, BASF is seeing growth in most of its customer industries, which are, however, emerging from a deep recession. Here, the automotive, IT and electronics industries are leading the way.
The company expects the following macroeconomic conditions in 2010:
- A moderate increase in global gross domestic product (+2.7 percent) and significant growth in global chemical production (excluding pharmaceuticals) (+5.3 percent)
- An average euro/dollar exchange rate of $1.40 per euro and
- An average oil price of $75 per barrel
In view of this economic situation, Hambrecht expects BASF’s sales to grow again in 2010 and that the company will outpace global chemical production. Because the economic situation remains fragile, BASF will continue to rigorously implement its efficiency and restructuring programs. The company will also continue to adjust its investment plans to the current market conditions.
“We expect a significant increase in EBIT, mainly due to a rise in volumes and cost synergies from the Ciba integration. Furthermore, costs related to the integration of Ciba will be considerably lower in 2010 than they were in 2009. Our goal is clear: In 2010, we expect to earn a premium on our cost of capital again,” said Hambrecht.
Higher earnings in Plastics and Agricultural Solutions
Sales in the Chemicals segment declined considerably as a result of lower prices and significantly lower volumes. The Petrochemicals division, in particular, was adversely impacted by this development. The segment’s income from operations was therefore significantly below the previous year’s level. Rigorous measures to adjust capacity, reduce costs and increase efficiency helped to mitigate the decline in earnings.
Lower volumes and prices, especially for standard products, also led to a decline in sales in the Plastics segment. Earnings in the segment were slightly above the previous year’s level. In 2009, the Performance Polymers division made a positive contribution to earnings after a loss in 2008. This was primarily due to higher demand from the second quarter onward and cost-cutting measures.
In the Performance Products segment, sales increased as a result of the Ciba acquisition. Volumes and prices declined, however, in all divisions of the segment. EBIT before special items was lower due to the effects of the crisis in nearly all customer industries. At €700 million, however, it was clearly positive and only 9 percent less than in 2008. EBIT was negatively impacted by high expenses for the integration of Ciba.
Sales declined sharply in the Functional Solutions segment as a result of a dramatic decline in demand from the key customer industries – construction and automotive. In the Catalysts division, lower precious metal prices led to a decrease in sales in the precious metals trading business. The segment’s earnings were below the previous year’s level. The Construction Chemicals and Coatings divisions increased earnings as a result of better margins and cost-cutting measures.
Sales in the Agricultural Solutions segment increased further in 2009, and earnings reached a record high. This was primarily attributable to higher prices and positive currency effects, which more than offset the planned increase in spending for research and development as well as marketing and sales.
Sales in the Oil & Gas segment declined significantly compared with the previous year. This was mainly due to lower prices for crude oil and natural gas. In 2009, earnings were lower than in 2008 as a result of the smaller contribution from the Exploration & Production business sector due to the decline in oil prices.
Sales in the segment “Other” declined compared with the previous year. The decline was mainly due to lower sales in the Styrenics and fertilizers businesses and in the trade with raw materials. EBIT in “Other” was negative, but improved compared with 2008. This was due primarily to higher earnings in Styrenics.
Strong improvement in earnings in North America and Asia
Sales in Europe declined by 21 percent to €30.4 billion. Chemicals, Plastics, Functional Solutions and Oil & Gas posted significantly lower sales. In the Performance Products segment, however, sales rose due to the integration of Ciba. Compared with 2008, earnings fell to €2.4 billion. This was primarily due to the lower contribution from the Oil & Gas segment.
Sales in North America fell by 22 percent to €9.3 billion. The decline in local currency terms was 25 percent. Sales volumes were considerably lower in almost all segments. Nevertheless, thanks to successful cost management and the value before volume strategy, earnings increased by €422 million to €495 million.
In Asia Pacific, sales declined by 8 percent, to just under €8 billion in 2009. The decrease in local currency terms was 11 percent. Sales increased in the Agricultural Solutions and Performance Products segments, but were lower in the Chemicals, Plastics and Functional Solutions segments. Thanks to successful cost reduction measures, earnings almost doubled to €503 million.
In South America, Africa, Middle East, sales declined by 2 percent to €3 billion. This was a decrease of 1 percent in local currency terms. At €289 million, income from operations was lower than in the previous year. Higher earnings in Styrenics and the Construction Chemicals almost offset the decline in Agricultural Solutions.
The year 2009 showed that BASF has acted and shaped the future in the crisis. “This is only possible because we have the best team in the industry. Our employees have demonstrated unparalleled flexibility and resilience and have helped us to master the crisis better than many of our competitors. I would like to thank the entire team sincerely for their outstanding commitment,” said Hambrecht.
BASF is the world’s leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics and performance products to agricultural products, fine chemicals as well as oil and gas. As a reliable partner BASF creates chemistry to help its customers in virtually all industries to be more successful. With its high-value products and intelligent solutions, BASF plays an important role in finding answers to global challenges such as climate protection, energy efficiency, nutrition and mobility. BASF posted sales of more than €50 billion in 2009 and had approximately 105,000 employees as of the end of the year. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com.
On February 25, 2010, you can obtain further information from the Internet at the following addresses:
Report “Overview Full Year and 4th Quarter 2009”
(from 7:00 a.m. CET)
Press release (from 7:00 a.m. CET)
Live Transmission (from 10:30 a.m. CET)
Speech – print version (from 10:30 a.m. CET)
Live Transmission – Telephone Conference for Analysts and Investors as well as Information about BASF shares
(from 1:00 p.m. CET)
Note to Editors:
On February 25, 2010 from 11:30 a.m. you can download current photos of the Annual Press Conference from the following link:
You can download general corporate press photos from the Internet at:
You can download a TV-interview with Dr. Jürgen Hambrecht at the following link as of February 25, 12:00 noon:
Current TV footage is available at:
This release contains forward-looking statements based on current experience, 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. BASF does not assume any obligation to update the forward-looking statements contained in this release.