Ludwigshafen, Germany - Total sales for the BASF group rose by 8 percent in 2008 to Euro 62 300 million, despite the "deep global economic crisis," the group said. But its income from operations before special items fell 10 percent to just under Euro 6900 million.
In its polyurethanes division, BASF reported that in the fourth quarter (Q4) of 2008, the previous weakening seen in North America continued and sales volumes "dropped abruptly" at the beginning of Q4, particularly in Asia, but also in Europe. "In particular, there was a significant decline in demand from customers in the automotive, construction and furniture industries," the company said.
Polyurethane sales in Q4 2008 of Euro 1063 million dropped 20 percent compared to sales in Q4 of 2007. In the rest of the plastics division sales dropped by 28 percent, BASF said. "Capacity utilisation rates of our MDI (methylene diphenyl diisocyanate) and TDI (toluene diisocyanate) plants were reduced significantly in the fourth quarter," the group said.
Income from operations for plastics -- performance polymers and polyurethanes -- (EBIT before special items) was minus Euro 304 million compared to Euro 308 million in Q4 2007, caused, BASF said, by the significantly reduced volume of business, lower margins and write-downs on inventory.
For the full year, sales in polyurethanes were down only 0.5 percent to Euro 5140 million, while earnings (EBIT) before special items dropped 57 percent to Euro 544 million.
BASF pointed out that its European business grew until Q3, and in Asia Pacific, the growth of recent years also continued in the first half of 2008. But during the Beijing Olympic, restrictions on production at BASF's customers, and on moving its own products, led to a decline in demand there in the autumn.
Lower PU sales in North America were caused by the slowdown in BASF's most important customer industries - construction and automotive, and in September, Hurricane Gustav temporarily stopped production.
In the first three quarters, BASF said, it managed to largely pass on higher raw material and energy prices in the form of higher prices.
The lower income from operations in PU was a result of "the drastic decline in demand" in the fourth quarter. Write-downs on inventory were also necessary in the fourth quarter because of a significant decline in sales prices.
BASF said it is "acting quickly and decisively to combat the effects of the global economic crisis," by tailoring production capacities and investments to the "drastic decline in demand." It is also accelerating its restructuring and efficiency programmes.
"With our diversified portfolio, we are far better positioned in this recession than other companies in the chemical industry. Strong businesses such as crop protection, nutrition, cosmetics, hygiene as well as oil and gas act as stabilising factors," said BASF chairman Dr Juergen Hambrecht (pictured), at the 26 Feb results meeting.
"Right now it is particularly important that we are very solidly financed and have one of the best ratings in the chemical industry. Our strengths include a high free cash flow, which, as in previous years, significantly exceeded €2 billion in 2008," Hambrecht continued.
BASF said it would accelerate its previously announced efficiency and restructuring programmes, closing less profitable plants and sites throughout the group, with the loss of 1500 jobs.