BASF reports Q1 net income up 2.1% year-over-year to €1.48B while sales revenue falls 1.1% to €19.51B due to sales declines in Oil & Gas segment, negative effects from comparatively weak US dollar, currencies in emerging markets
May 2, 2014
Income from operations (EBIT) before special items amounted to €2.1 billion, 3 percent below the level of the first quarter of 2013. While earnings in the Performance Products and Functional Materials & Solutions segments improved significantly, the contribution from the Oil & Gas segment fell considerably.
EBIT included a total of €109 million in special items in the first quarter of 2014. This was largely attributable to special income from the divestiture of shares in non-BASF-operated oil and gas fields in the British North Sea. EBIT therefore grew year-on-year by €80 million to reach €2.2 billion. EBITDA rose by €96 million to €3.0 billion. The financial result decreased by €57 million to minus €183 million.
Income before taxes and minority interests improved year-on-year by €23 million to €2.1 billion. Net income grew by €31 million to €1.5 billion. Earnings per share were €1.61 in the first quarter of 2014, compared with €1.57 in the same period of 2013.
In North America, BASF recorded a successful start to 2014 with first quarter sales of €3.9 billion, an increase of 5 percent in euro terms (9 percent in U.S. dollar terms) compared to the first quarter of 2013. EBIT before special items in North America was €491 million for the first quarter, an increase of 8 percent in euro terms (13 percent in U.S. dollar terms) versus the same period in 2013.
"Our sales growth in North America is largely the result of significantly higher sales volumes. Our earnings surpassed the level of the previous first quarter, thanks to higher contributions from the Chemicals and the Agricultural Solutions segments," said Hans Engel, Chairman and CEO of BASF Corporation.
World-scale investment in the United States being evaluated
BASF is evaluating an investment in a world-scale methane-to-propylene complex on the U.S. Gulf Coast. This would be BASF's largest single-plant investment to date. Propylene is one of the most important basic chemicals in the petrochemical industry and is used in the production of a wide range of higher-value chemicals. Details on the potential investment are currently under evaluation.
"North America is an important market for BASF, and we are continuing to invest and grow in the region," said Engel. "This investment would allow BASF to take advantage of very competitive gas prices in the U.S. due to shale gas production, considerably improve our cost position and improve our backward integration in the United States."
Global outlook for 2014 confirmed
The company's expectations for the global economic environment in 2014 remain unchanged:
"For 2014, we anticipate somewhat faster growth in the global economy than in 2013. We expect to perform well in a market environment that remains volatile and challenging. We therefore stand by our outlook for 2014 despite unfavorable currency developments. We expect a slight rise in EBIT before special items, especially as a result of considerably higher contributions from the Performance Products and Functional Materials & Solutions segments," said Bock.
Sales are likely to decrease slightly due to the divestiture of the gas trading and storage business planned for the middle of 2014. EBIT will likely considerably increase. The special income arising from the planned divestiture of the gas trading and storage business should make a significant contribution here.
Business development in the segments in the first quarter
In the Chemicals segment, sales matched the level of the previous first quarter. Lower prices and negative currency effects were offset by increased volumes. Sales volumes grew, particularly as a result of stronger demand in the Intermediates division as well as higher volumes in the Petrochemicals division, especially in North America. Earnings decreased slightly, mainly due to margin pressure.
Sales in the Performance Products segment were at the level of the previous first quarter despite negative currency effects and slightly lower sales prices. This was attributable to higher sales volumes. Strict fixed cost management contributed to a considerable rise in earnings.
In the Functional Materials & Solutions segment, sales were slightly higher on account of increased volumes, thanks primarily to strong demand from the automotive industry. Negative currency effects reduced sales growth. In the Construction Chemicals division, sales declined slightly as a result of portfolio effects, as well. Earnings considerably surpassed the level of the first quarter of 2013. All divisions contributed to this.
Sales grew considerably in the Agricultural Solutions segment. This was mainly because of the strong start in the Northern Hemisphere. Negative currency effects were more than compensated for by raising volumes and prices. Earnings rose slightly thanks to these higher volumes and prices.
Sales in the Oil & Gas segment were considerably below the level of the previous first quarter. In the Natural Gas Trading business sector, sales volumes were significantly down year-on-year as a result of the mild winter in Europe. Despite lower prices for crude oil and missing volumes from offshore production in Libya, sales levels remained stable in the Exploration & Production business sector. This was largely due to additional volumes from Norway. Margin pressure and lower volumes in natural gas trading as well as the smaller contribution from Libya led to a considerable earnings decline in the segment.
Sales in Other rose slightly compared with the first quarter of 2013. This was mainly the result of higher volumes in raw materials trading. EBIT before special items declined considerably, however. Currency losses and valuation effects for the long-term incentive program played a significant role here. Whereas provisions had been reversed in the first quarter of 2013, the positive development of the BASF share led to expenses for increasing provisions in the first quarter of 2014.
BASF - The Chemical Company
BASF Corporation, headquartered in Florham Park, New Jersey, is the North American affiliate of BASF SE, Ludwigshafen, Germany. BASF has nearly 17,000 employees in North America, and had sales of $19.3 billion in 2013. For more information about BASF's North American operations, visit www.basf.us.
BASF is the world's leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. We combine economic success with environmental protection and social responsibility. Through science and innovation, we enable our customers in nearly every industry to meet the current and future needs of society. Our products and solutions contribute to conserving resources, ensuring nutrition and improving quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF had sales of about €74 billion in 2013 and over 112,000 employees as of the end of the year. Further information on BASF is available on the Internet at www.basf.com.
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