BASF income and sales soar

By David Reed, UT EditorLudwigshafen, Germany-A 20-percent rise in sales of polyurethane products in 2004 lies behind what BASF Group labels "a very successful business year." Total sales for the plastics segment-which covers performance polymers, styrenics and polyurethanes activities-rose almost 20 percent, from €8787 million ($11 600 million) to €10 532 million, the company reported, with 9.2 percent of this coming from volume increases, 15.2 percent from price rises, and 0.7 percent from portfolio changes, all offset by a loss of 5.2 percent on currencies.But, even with PU sales approaching €3500 million ($4618 million), and the firm's styrenics business showing an even more dramatic 23-percent rise, taking its turnover to €4450 million, total income for the firm's plastics division was just 6.3 percent on sales. This is despite the fact that the division's EBIT (defined by BASF as income from operations) more than doubled in 2004, to €669 million from €296 million in 2003. This was "mainly due to higher volumes and lower fixed costs as a result of restructuring measures," the firm said in a 9 March announcement.But, the firm adds, "we increased prices considerably during the year to pass on the significantly higher costs of raw materials." Even so, BASF emphasised, "margins remain less than satisfactory."Even after these dramatic improvements, the plastics division income is less than half BASF's total income-on-sales figure of 12.9 percent. The latter is at an historic high, however, improving from just 3.7 percent in 2001.The firm's chemicals business showed even more dramatic changes, with a 216-percent rise in income, to €1241 million in 2004. And Performance products-which covers the firm's performance chemicals, coatings and functional polymers businesses-also turned in solid improvements, up 123 percent to €1068 million.BASF's other businesses, agricultural products & nutrition, oil & gas, and other activities were generally less successful, although the first reported a 110-percent rise in income, to €540 million, despite a 62-percent fall in its fine chemicals segment to €48 million. Oil & gas income rose 20 percent, to €1637 million, while the firm's other activities fell deeper into the red, with a loss of €299 million.Overall, though, "2004 was a very successful business year for BASF. Income from operations rose significantly in a positive global economic environment, driven by economic growth in the United States and Asia," the firm said. "We increased production and sales volumes substantially and raised sales prices. In addition, our restructuring measures had a positive effect, enabling us to reduce our fixed costs considerably," the firm's statement said."In the course of 2005, we anticipate slower growth in global chemical production," said Jürgen Hambrecht, the firm's chairman in a letter to "shareholders and friends of BASF," adding that "the mid-term prospects are favourable." But, providing that political trouble spots "do not flare up and that there is no sudden downturn in the economic environment … we expect to achieve slightly higher sales and follow on from the high level of income … posted in 2004," Hambrecht concluded."