BASF Increases Sales and Income from Operations in 2012
Posted on February 26, 2013 @ 09:28 am
BASF maintained its good performance in 2012. The company exceeded the 2011 record levels in sales and income from operations (EBIT) and once again earned a substantial premium on the cost of capital.
“The Oil & Gas and Agricultural Solutions segments achieved new records, while development in our chemicals business was weaker than in 2011,” said Dr. Kurt Bock, xhairman of the Board of Executive Directors of BASF SE.
Sales in the fourth quarter of 2012 were €19.6 billion, 9% higher than in the same quarter of the previous year. This increase was mainly due to higher volumes in almost all segments as well as price and currency effects. At €1.8 billion, EBIT before special items was 18% above the level of the previous fourth quarter, mainly due to significantly higher volumes in Oil & Gas as well as improved earnings in Polyurethanes and Construction Chemicals.
For the full year, BASF increased sales to €78.7 billion, up 7% compared with 2011. EBIT before special items improved by 5% to €8.9 billion and EBIT by almost 5% to around €9 billion. Net income fell by €1.3 billion to €4.9 billion, due in part to the higher earnings contribution from Oil & Gas and thus the significantly higher taxes. Furthermore, gains from the sale of BASF’s shares in K+S Aktiengesellschaft in 2011 were predominantly tax-free.
At the Annual Shareholders’ Meeting, the Board of Executive Directors and the Supervisory Board will propose a higher dividend of €2.60 per share. This is an increase of €0.10 compared with the previous year. Based on the 2012 year-end share price of €71.15, the dividend yield would be 3.65%.
“ At €6.7 billion, cash flow from operating activities once again reached a high level,” said Dr. Hans-Ulrich Engel, chief financial officer of BASF. The equity ratio of 40.1% remained at a high level.
BASF’s outlook for 2013 is based on the following economic conditions (previous year figures in parentheses):
• World economic growth: +2.4% (+2.2%).
• Growth in global chemical production: +3.6% (+2.6%).
• An average euro/dollar exchange rate of $1.30 per euro
($1.28 per euro).
• An average oil price of $110/barrel ($112/barrel).
“We aim to grow again in 2013 and exceed the 2012 levels in sales and EBIT before special items,” said Dr. Bock. “Innovations are the basis for future profitable growth and thus lie at the core of our competitiveness.”
The company strives to increase sales and earnings in all operating segments. The expected increase in demand, together with measures to improve operational excellence and raise efficiency, will contribute to this. BASF aims to earn a high premium on its cost of capital once again in 2013.
BASF will once again increase its R&D spending in 2013, after expenditures of €1.7 billion in the past year – around 9% more than in 2011.
In Chemicals, sales in the fourth quarter 2012 increased, equally driven by price and portfolio effects. Volume growth and currency tailwinds also contributed to topline growth. EBIT before special items declined mainly due to lower margins and plant shutdowns. For the full year 2012, sales increased by 7% to €13.8 billion. EBIT before special items decreased by 30% to €1.7 billion.
Sales in Plastics increased due to higher volumes and prices as well as positive currency effects. There was continuing strong demand from the automotive industry, particularly in North America and Asia. EBIT before special items rose substantially due to a significant improvement in earnings in Polyurethanes. In 2012, sales in the Plastics segment increased 4% to €11.4 billion. EBIT before special items declined by 27% to €873 million.
Sales in Performance Products came in above the previous fourth quarter, mainly driven by higher volumes. Price declines were offset by positive currency effects. EBIT before special items in the segment decreased due to lower margins. Sales for the full year 2012 of €15.9 billion were around 1% higher than in the previous year. EBIT before special items fell 17% to €1.4 billion.
Sales in Functional Solutions decreased slightly compared with the fourth quarter of 2011. Volumes were down, particularly due to a lower contribution from precious metals trading. A small decrease in sales prices was compensated for by currency tailwinds. Healthy demand in Catalysts and Coatings came from the automotive industry. Strict fixed cost management led to a substantial increase in EBIT before special items. Sales in 2012 were €11.5 billion, 1% higher than in 2011. At €561 million, EBIT before special items was slightly above the previous year.
Sales in Agricultural Solutions were up in the fourth quarter of 2012. Growth was driven by higher volumes, the Becker Underwood acquisition, and favorable currency effects. Sales in South America increased significantly despite dry weather conditions in Brazil. Prices were just below the high level of the prior-year quarter. EBIT before special items was lower than in the fourth quarter of 2011 due to higher R&D expenditures and investments in growth markets. In addition, royalty income in North America reported in the fourth quarter in 2011 was already reported in the third quarter in 2012. Agricultural Solutions had another record year in 2012. Sales rose by 12% to €4.7 billion. EBIT before special items grew by 28% to more than €1 billion. The EBITDA margin target of 25% was achieved.
Sales in Oil & Gas in the fourth quarter grew strongly mainly due to significantly increased oil production in Libya and higher volumes from natural gas trading. The start-up of additional wells in the Achimgaz joint venture also contributed to sales. EBIT before special items grew substantially. Net income decreased by 9% and was €250 million. For the full year, sales rose by 39% to €16.7 billion and EBIT before special items almost doubled to €4.1 billion. Net income also grew to €1.2 billion.
In the fourth quarter, sales in Other were around €1.2 billion. These activities include the sale of raw materials, engineering and other services, rental income and leases. EBIT before special items declined by €91 million mainly due to lower earnings of other businesses. In 2012, sales were €4.8 billion, a decline of 24% and EBIT before special items decreased to minus €839 million. This was primarily due to the divestiture of the styrenic plastics activities and the fertilizer business.