BASF Reports Market Environment Remains Volatile and Challenging

The market environment continued to be volatile and challenging. Growth rates for the global economy, industrial production and the chemical industry in 2015 all lagged considerably behind the company’s expectations.
 
“Over the course of the year, global economic growth slowed significantly. In this economic environment, we have taken decisive measures: We have significantly reduced our inventories, strengthened our cost management and pruned our portfolio,” said Dr. Kurt Bock, chairman of the Board of Executive Directors of BASF SE.
 
In the fourth quarter of 2015, sales were €13.9 billion, 23% below the level of the same quarter of the previous year. This was mainly due to the asset swap with Gazprom, which was completed at the end of September. As a result of the swap, the sales contribution of roughly €3 billion from the gas trading and storage business ceased in the Oil & Gas segment in the fourth quarter of 2015.
 
Income from operations (EBIT) before special items fell by €436 million to about €1 billion in the fourth quarter. The decline was especially due to significantly lower earnings in the Oil & Gas and Chemicals segments compared with the previous fourth quarter.
 
For the full year, sales decreased by 5% to €70.4 billion. Sales prices fell in almost all divisions (minus 9%), largely on account of the sharp drop in raw material prices. Sales volumes in 2015 rose slightly overall (plus 3%), mainly as a result of higher volumes in the Oil & Gas segment. Volumes in the chemicals business, which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments, were almost at the same level as the previous year.
 
At €6.2 billion, EBIT for the BASF Group in 2015 was €1.4 billion lower than the previous year’s level. Net income amounted to €4.0 billion, below the previous year’s level of €5.2 billion. At a record level of €9.4 billion, cash provided by operating activities in 2015 exceeded the previous year’s level by €2.5 billion. Free cash flow rose by €2.0 billion to €3.6 billion in 2015.
 
In the Chemicals segment, sales in the fourth quarter fell by 22% to €3.2 billion mainly due to lower prices. EBIT before special items decreased by €331 million to €249 million, mainly as a result of declining margins in Petrochemicals. Full-year sales declined by 14% to €14.7 billion, largely due to lower prices on account of decreased raw material costs, especially in the Petrochemicals division. EBIT before special items fell by €211 million versus the previous year to €2.2 billion. This was primarily attributable to the declining margins in the Monomers division as well as rising fixed costs from the startup of new production plants, such as in Camaçari, Brazil, and Chongqing, China.
 
In the Performance Products segment, fourth-quarter sales declined by 2% to €3.6 billion due to prices and portfolio effects. Compared with the previous fourth quarter, EBIT before special items rose by €11 million to €228 million due to higher contributions from the Performance Chemicals and Dispersions & Pigments divisions. In the full year, sales were up by 1% to €15.6 billion.
 
In the Functional Materials & Solutions segment, sales in the fourth quarter increased by 1% to €4.5 billion due to higher volumes and positive currency effects. EBIT before special items grew by €169 million to €389 million, especially due to a higher earnings contribution from Performance Materials. Full-year sales rose by 5% to €18.5 billion. EBIT before special items increased by €452 million to €1.6 billion, mainly because of the considerable improvement in earnings in the Performance Materials and Construction Chemicals divisions.