BASF
Full year outlook raised slightly after strong Q2 / Polymer feedstocks buoyant
 Steamcracker II in Ludwigshafen / Germany (Photo: BASF) |
Following a strong second quarter in which EBIT before special items surged ahead by 32% to EUR 2.3 bn, and sales rose 12% against the 2016 period to EUR 16.3 bn, BASF (Ludwigshafen / Germany; www.basf.com) has corrected its full-year forecast slightly upward. In a conference call with journalists to present Q2 and H1 results, CEO Kurt Bock said the German chemicals and plastics giant now takes a “somewhat more positive view” of the underlying conditions for 2017.
For the year as a whole, BASF now expects group-wide EBIT before special items to increase by at least 11%, compared with an earlier forecast of 10% or less. Sales will grow by “at least” 6% rather than “about” 6%. In a year-on-year comparison, the EBIT figure for the second half will likely be “slightly” higher, Bock said. He noted that the forecast takes into consideration the good H1 development for the Chemicals segment, which includes monomers for plastics production. Here, momentum could slacken going forward, however, as weaker oil prices and the softness of the US dollar may have a negative impact on the bottom line.
Figures for Chemicals in the second quarter show the CEO’s remarks about good development to be somewhat of an understatement. Sales rose 25% to EUR 4 bn, thanks largely to what the group described as “significantly higher selling prices.” In particular, margin improvement in the Petrochemicals and Monomers divisions played a leading role. The segment’s EBIT before special items soared by 145% to EUR 1.1 bn. The unquantified negative impact on earnings from the deadly accident at the Ludwigshafen North Harbour in October 2016 was compensated by insurance.
Within the segment’s divisions, Petrochemicals sales improved by 20% in Q2 to EUR 1.6 bn, with Monomers sales increasing by 38% to 1.7 bn. Earnings figures were not disclosed, but the group said EBIT improvements in both divisions as well as Intermediates were “considerable.” Higher raw materials prices as well as continuing strong demand led to a “significant spike” in selling prices, with steam cracker products a standout. Volume sales declined slightly, due to the still impaired output of oxo alcohols and plasticisers in the wake of last October’s explosion and fire. Thanks to the insurance payments, however, fixed costs declined.
In Monomers, isocyanate feedstocks for polyurethanes profited from price increases. Sales volumes rose slightly, thanks to higher MDI volumes and currency effects. BASF said earnings in this division were also influenced positively by the restructuring of caprolactam production in Europe. Plans for this announced in September 2016 called for a reduction in capacity from 500,000 to 400,000 t/y over 18 months – see Plasteurope.com of 14.09.2016. Bock told journalists that TDI output is still running below capacity as the site is having to make do with a smaller reactor while repairs to its glitch-plagued 300,000 t/y plant at Ludwigshafen continue – see Plasteurope.com of 17.02.2017. Some of the volume slack is being taken up by the plant at Schwarzheide in eastern Germany.
BASF’s Functional Materials & Solutions segment, which includes the engineering plastics and thermoplastic polyurethane businesses within the Performance Materials division, saw a sales rise of 12% to EUR 5.3 bn in Q2. EBIT before special items receded by 21% to EUR 422m, despite higher selling prices and volumes. Both thermoplastic polyurethanes and engineering polymers saw “slight volume improvement” and both businesses enjoyed “substantial” demand from the consumer products sector, along with some increase in demand from the construction and automotive sectors. However, higher raw material costs put downward pressure on margins.
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BASF's "Half-Year Financial Report 2017" as a PDF file
For the year as a whole, BASF now expects group-wide EBIT before special items to increase by at least 11%, compared with an earlier forecast of 10% or less. Sales will grow by “at least” 6% rather than “about” 6%. In a year-on-year comparison, the EBIT figure for the second half will likely be “slightly” higher, Bock said. He noted that the forecast takes into consideration the good H1 development for the Chemicals segment, which includes monomers for plastics production. Here, momentum could slacken going forward, however, as weaker oil prices and the softness of the US dollar may have a negative impact on the bottom line.
Figures for Chemicals in the second quarter show the CEO’s remarks about good development to be somewhat of an understatement. Sales rose 25% to EUR 4 bn, thanks largely to what the group described as “significantly higher selling prices.” In particular, margin improvement in the Petrochemicals and Monomers divisions played a leading role. The segment’s EBIT before special items soared by 145% to EUR 1.1 bn. The unquantified negative impact on earnings from the deadly accident at the Ludwigshafen North Harbour in October 2016 was compensated by insurance.
Within the segment’s divisions, Petrochemicals sales improved by 20% in Q2 to EUR 1.6 bn, with Monomers sales increasing by 38% to 1.7 bn. Earnings figures were not disclosed, but the group said EBIT improvements in both divisions as well as Intermediates were “considerable.” Higher raw materials prices as well as continuing strong demand led to a “significant spike” in selling prices, with steam cracker products a standout. Volume sales declined slightly, due to the still impaired output of oxo alcohols and plasticisers in the wake of last October’s explosion and fire. Thanks to the insurance payments, however, fixed costs declined.
In Monomers, isocyanate feedstocks for polyurethanes profited from price increases. Sales volumes rose slightly, thanks to higher MDI volumes and currency effects. BASF said earnings in this division were also influenced positively by the restructuring of caprolactam production in Europe. Plans for this announced in September 2016 called for a reduction in capacity from 500,000 to 400,000 t/y over 18 months – see Plasteurope.com of 14.09.2016. Bock told journalists that TDI output is still running below capacity as the site is having to make do with a smaller reactor while repairs to its glitch-plagued 300,000 t/y plant at Ludwigshafen continue – see Plasteurope.com of 17.02.2017. Some of the volume slack is being taken up by the plant at Schwarzheide in eastern Germany.
BASF’s Functional Materials & Solutions segment, which includes the engineering plastics and thermoplastic polyurethane businesses within the Performance Materials division, saw a sales rise of 12% to EUR 5.3 bn in Q2. EBIT before special items receded by 21% to EUR 422m, despite higher selling prices and volumes. Both thermoplastic polyurethanes and engineering polymers saw “slight volume improvement” and both businesses enjoyed “substantial” demand from the consumer products sector, along with some increase in demand from the construction and automotive sectors. However, higher raw material costs put downward pressure on margins.
e-Service:
BASF's "Half-Year Financial Report 2017" as a PDF file
28.07.2017 Plasteurope.com [237469-0]
Published on 28.07.2017
German version of this article...