BASF has had a powerful start to 2011. Capacity utilization rates in the company’s plants were good; in particular, demand in the chemicals business (Chemicals, Plastics, Performance Products, Functional Solutions) increased compared with the same quarter of the previous year. Sales grew by 25% to €19.4 billion. The Cognis businesses acquired in December 2010 made a significant contribution to this substantial sales growth. The earthquake off the coast of Japan and its aftermath as well as the tense political situation in North Africa have not yet had a significant impact on BASF’s business.
“Despite strong increases in raw materials costs, income from operations before special items rose by 40% to €2.7 billion,” said Dr. Jürgen Hambrecht, Chairman of BASF’s Board of Executive Directors at the Annual Meeting in the Congress Center Rosengarten in Mannheim, Germany. Hambrecht and Dr. John Feldmann are retiring from the BASF’s Board of Executive Directors at the end of the Annual Meeting. At that time, the new Board led by Dr. Kurt Bock will take office.
Compared with the first quarter of 2010, sales volumes rose in nearly all segments. As a result of the situation in Libya, oil production was suspended at the end of February 2011; this led to a reduction in oil production volumes in the Oil & Gas segment. In the Agricultural Solutions segment, prices declined slightly; all other segments reported price increases.
Income from operations (EBIT) increased by 39% to €2.6 billion compared with the first quarter of the previous year. EBITDA rose by €738 million to €3.4 billion. The EBITDA margin rose to 17.4% (first quarter of 2010: 17.0%).
The financial result was €830 million, an improvement of €910 million compared with the same period of the previous year. This was due to the special item of €887 million that resulted from the sale of the company’s stake in K+S Aktiengesellschaft. Overall, special items in income before taxes and minority interests amounted to €705 million.
Income before taxes and minority interests rose by €1.6 billion in the first quarter of 2011 to €3.4 billion. At 24.7%, the tax rate was lower than in the first quarter of 2010. This decline was mainly attributable to the lower share of earnings from the highly-taxed Oil & Gas segment. Net income increased by €1.4 billion to €2.4 billion.
In the Chemicals segment, sales in all divisions increased substantially as a result of significantly higher sales prices in almost all business areas as well as greater volumes and positive currency effects. Earnings sharply exceeded the level of the previous first quarter due in large part to good margins, in particular in the acrylic acid value-adding chain, as well as high capacity utilization rates.
The Plastics segment experienced strong demand in all business areas; sales improved substantially compared with the first quarter of 2010 in particular as a result of higher sales volumes. Owing to the ongoing shortages of several products, higher raw materials costs could largely be passed on to the markets, especially in the Performance Polymers division. Thanks to high sales volumes, earnings increased sharply.
Sales in t he Performance Products segment were also far above the level of the same quarter of 2010. The acquired Cognis businesses contributed significantly to the improvement in sales. Sales growth was additionally boosted by increased volumes as well as higher prices resulting from the rise in raw materials costs. Earnings improved as a result of the inclusion of the Cognis businesses, synergy effects from the Ciba integration and the successful repositioning of the combined businesses.
In the Functional Solutions segment, there was an overall strong rise in sales volumes and sales. Demand from the automotive industry increased compared with the same quarter of the previous year. As a result of robust construction activity in several emerging markets in Asia, South America and Eastern Europe, there was a slight recovery in demand from the building sector. Higher precious metal prices boosted sales growth. Earnings improved substantially in particular thanks to the contribution from the Catalysts division.
In the Agricultural Solutions segment, the season started successfully. Sales volumes grew in nearly all regions and indications. As a result of favorable weather conditions in the northern hemisphere and in South America, demand for the company’s products rose. Despite intense competition, the high sales level of the first quarter of 2010 could be slightly exceeded. Higher sales volumes led to a slight improvement in earnings.
Following the intensification of the situation in Libya, oil production was suspended at the end of February 2011. Nevertheless, sales in the Oil & Gas segment were slightly above the level of the first quarter of 2010. Higher crude oil and natural gas prices offset the reduction in oil production in Libya. In the Natural Gas Trading business sector, the negative time-lag effect adversely impacted earnings. Earnings improved significantly overall due to higher prices.
Other posted substantial sales growth, primarily attributable to higher prices in the Styrenics business and in raw materials trading. There was also a strong improvement in earnings in the Styrenics business. Overall, earnings in Other were slightly above the level of the first quarter of 2010.