The German chemical giant has announced it has lowered its expectations for the year as a weak commodity market continues to hurt sales and profits. The group said it was 'unlikely' it would achieve its targets.
The world's largest chemical maker, BASF, on Tuesday lowered its outlook for the year after a slump in oil prices weighed down on the company's top line.
The Ludwigshafen, Germany-based company posted a drop in third-quarter sales to 17.4 billion euros ($19.2 billion), 5 percent below the same time last year. The figure fell short of analysts' estimates of nearly 18.3 billion euros. Meanwhile, income from operations (EBIT) before special items sank by 10 percent to 1.6 billion euros.
“We experienced a pronounced summer lull and no volume momentum in September. Major markets like Brazil are in a recession or face lower growth rates, such as China,”Chief Executive Kurt Bock said in a statement.
Hurt by the commodity market
Low commodities prices particularly hurt BASF's Oil & Gas division, where sales were down 2 percent, as well as the Chemicals segment, which suffered a steep year-on-year drop of 13 percent to 3.6 billion euros. The decline was slightly offset by higher volumes and prices in the Agricultural Solutions segment, where sales rose by 6 percent to 1.1 billion euros.
Net income was one of the report's few other bright spots, beating expectations as the group's bottom line shot up 19 percent to 1.2 billion euros compared to the previous third quarter.
Still, this was not enough to brighten the outlook for the full year. "In the first three quarters of 2015, growth in the global economy remained considerably below the company's expectations. The economic environment clouded over in important emerging markets, especially in China. BASF has further reduced its expectations for the global economy in 2015," the company said in the statement.
As a result, the company added, "it is unlikely that the BASF Group will achieve the slight sales growth forecast for 2015." In fact, concluded CEO Bock, "we now expect a slight decrease in [annual] sales and EBIT before special items."
Adjusting its overall forecast downwards, the chemicals giant said it expected growth in industrial production for 2015 to come in at 2 percent, down nearly 1 percent from previous estimates, while growth in chemical production was forecast at 3.5 percent, compared to an earlier forecast of 3.8 percent. Factoring in this slowdown across the board, BASF said it now expected global domestic growth for the year to come in at 2.3 percent, down from previous estimates of 2.4 percent.
pad/hg (dpa, Reuters)