Chemicals major BASF managed to post a small gain in third quarter revenues despite the difficult operating environment affecting the industry, amid early signs that the sector may have hit bottom and be ready for a recovery.
Group sales lifted 2.1 per cent to €7.7 billion compared to third-quarter 2002, although continuing problems with high raw material prices pegged earnings before income tax (EBIT) back to €403 million, down 31 per cent year-on-year.
Sales volumes rose 4.5 per cent, and BASF managed to factor in a 2.1 per cent price increase, but said that pricing "still remains at an unsatisfactory level". Like its peers in the industry, BASF is under pressure from a reduction in demand for its products as well as competition from low-cost sources from the Far East.
Jürgen Hambrecht, BASF's chairman, told a press conference that full-year EBIT would be lower than in 2002. However, he added, "the latest figures for our ongoing business give grounds for hope that we have now reached the bottom of the downturn".
Cash provided by operating activities is a good indicator of BASF's financial strength, said Hambrecht, and at just over €3.5 billion, the figure for the first three quarters is already significantly higher than the full-year value for 2002 of €2.3 billion.
"But our own efforts are not enough if there is not a sustainable improvement in the economic climate. We saw no signs of such an improvement in the third quarter", he noted.
Hambrecht cautioned that though more and more indicators are positive and pointing upward, "we have to rely on facts rather than moods."
Looking at the performance of the individual business units, BASF noted that the Chemicals division saw sales rise just over 1 per cent, on higher volumes, to €1.37 billion. However, income in the segment was negatively impacted by persistently high raw material costs coupled with competitive pressure.
The Fine Chemicals unit, which operates as part of the Agricultural Products & Nutrition division and includes BASF's activities in pharmaceutical ingredients and excipients, had a 4.5 per cent decline in sales to €469 million, with price declines offsetting volume increases.
Oil & Gas posted significant increases in sales compared with the strong third quarter of 2002, while Plastics maintained sales at the level of the previous year, despite the weak dollar. Sales were slightly down in Performance Products.
However, with the exception of Agricultural Products & Nutrition, all the business segments reported lower income compared with the third quarter of 2002. This segment improved by more than 36 per cent (albeit to a loss of €97 million) thanks to higher sales volumes as well as cost-reduction measures.