The figures released this morning by German chemical giant BASF Group showed that sales reached €18.3 billion ($23.18 billion) in the third quarter of this year, an increase of 3% over last year's third quarter that was largely due to a sharp rise in volumes in the natural gas trading business sector. Especially heartening was the 9% rise in income from operations (EBIT) before special items, which increased by €150 million ($190 million) to around €1.8 billion ($2.28 billion), mainly thanks to the chemicals and oil & gas segments, together with 'other.' The agricultural solutions segment, by contrast, performed disappointingly, with a 75% drop in earnings.
According to Kurt Bock, chairman of the board of executive directors of BASF SE, the economic environment in the third quarter of 2014 was a "challenging" one. Not surprisingly: "Geopolitical tensions and increasing uncertainty about the global economic development significantly dampened demand for chemical products," he said during the conference call this morning.
No upturn in demand is expected in the fourth quarter of 2014, which has led the company to revise the expectations for the global economy in 2014 downwards.
"Sales will decline slightly compared with 2013 due to the divestiture of the gas trading and storage business planned for autumn 2014 and negative currency effects," said Bock. "We assume that the environment will remain volatile and challenging."
In its update on the "We create chemistry" strategy and the related financial targets for 2015, which were originally published in 2011, the company divulged that as it now stands, the financial targets for 2015 (sales: €80 billion $101.34 billion; EBITDA: €14 billion ($17.73 billion) will not be achieved. The growth rates for gross domestic product, industry and chemical production for 2010 to 2015 are lower than originally expected.
"The reasons for this weak global economic development are obvious: reduced growth dynamics of emerging markets and a delayed recovery in the European economy," said Bock.
Innovations are fundamental to the "We create chemistry" strategy: in 2020, BASF aims to generate €30 billion ($38 billion) of sales with products that will have been on the market for less than 10 years. To that end, the company is further developing the research organization and combining its competencies into three global platforms, two of which will be outside Europe (in Shanghai and North Carolina).
All three research platforms will be established globally to support the R&D needs of BASF's customers.
For 2015, BASF currently expects sales and EBITDA to be in line with, rather than, as was originally forecast, outperforming market expectations, For EBITDA, they are between €10 billion ($12.67 billion) and €12 billion ($15.20 billion). As Bock: commented: "With regard to our strategic direction, we are on track. Even in this somewhat more difficult environment, we will continue to grow profitably."