BASF increases 2013 sales and earnings and is cautiously optimistic for 2014
Sales of BASF Group in the fourth quarter of 2013 were €18.1 billion, slightly above the same period of the previous year. Volumes increased in all segments. Sales prices were slightly lower overall in the fourth quarter; negative currency effects lowered sales in all divisions. Acquisitions contributed to sales growth, particularly in the Oil & Gas and Agricultural Solutions segments. Income from operations (EBIT) before special items improved in all operating segments in the fourth quarter and increased by €223 million to €1.5 billion. EBIT rose by €584 million to €1.6 billion. This included special income of €429 million from the reclassification of GASCADE Gastransport GmbH. This joint venture had previously been fully consolidated. Since December 31, 2013, GASCADE has been accounted for using the equity method in the BASF Group financial statements due to a change in the voting rights in their supervisory board.
For the full year, sales rose by just under 3% to reach €74.0 billion. A considerable, mainly volumes-driven sales increase in the Oil & Gas and Agricultural Solutions segments was largely responsible for this development. Sales slightly declined in the chemicals business, which includes the Chemicals, Performance Products and Functional Materials & Solutions segments, despite higher sales volumes. This was mainly on account of negative currency effects. EBIT before special items in 2013 rose by €543 million to €7.2 billion. In addition to the successful business with crop protection products and a higher contribution from the Functional Materials & Solutions segment, this increase was also due in large part to the earnings improvement in Other.
Net income amounted to €4.8 billion, slightly above the previous year’s level. Earnings per share rose from €5.25 to €5.27. Adjusted earnings per share amounted to €5.37, €0.27 under the previous year.
“At €7.9 billion, operating cash flow reached a record level,” said Dr. Hans-Ulrich Engel, Chief Financial Officer of BASF.
At the Annual Shareholders’ Meeting on May 2, the Board of Executive Directors and the Supervisory Board will propose a dividend of €2.70 per share. This is an increase of €0.10 compared with the previous year. Based on the 2013 year-end share price of €77.49, BASF shares again offer a high dividend yield of 3.5%.
Outlook for full year 2014
“We do not expect strong tailwinds this year either. Nevertheless, we are cautiously optimistic with regards to global economic development. The world economy is expected to grow slightly faster in 2014 than in 2013, despite continuing volatility,” said Bock. For the global chemical industry, the company anticipates growth rates comparable with the previous year’s level and forecasts somewhat higher growth in key customer industries such as the transportation, consumer goods and electronics industries. This will likely have a positive effect on BASF’s business.
For 2014, BASF assumes the following economic conditions (previous year figures in parentheses):
- Global economic growth: +2.8% (+2.3%)
- Growth in global chemical production (without pharmaceuticals): +4.4% (+4.6%)
- An average euro/dollar exchange rate of $1.30 per euro
($1.33 per euro)
- An average oil price (Brent) of $110 per barrel ($109 per barrel)
Bock: “Overall, we expect to perform well in a market environment that remains challenging in 2014. We aim to increase our sales volumes excluding the effects of acquisitions and divestitures.” Nonetheless, sales are likely to decline slightly compared with 2013, due to the divestiture of the gas trading and storage business planned for the middle of 2014. BASF expects a slight increase in EBIT before special items, especially as a result of considerably higher contributions from the Performance Products and Functional Materials & Solutions segments. The company predicts a considerably higher EBIT for the BASF Group than in 2013, partially due to special income arising from the divestiture of the gas trading and storage business. “We aim to considerably increase EBIT after cost of capital and therefore again earn a high premium on our cost of capital,” continued Bock.
Development of the segments
In the Chemicals segment, fourth-quarter sales decreased by 5% to €4.2 billion. Higher sales volumes in all divisions could not compensate for lower prices and adverse currency effects. EBIT before special items rose by €65 million to €510 million, primarily as a result of substantially higher earnings in Petrochemicals. Sales for the full year declined by 5% compared with the previous year to €17.0 billion on account of lower prices and negative currency effects. EBIT before special items rose by €11 million to €2.2 billion.
Sales in Performance Products in the fourth quarter were stable at around €3.7 billion. Higher volumes compensated for lower prices and negative currency effects. EBIT before special items increased by €33 million to €216 million due to higher volumes and improved margins. Despite higher volumes, sales for the full year decreased by 1% to €15.5 billion. Compared with 2012, EBIT before special items decreased by €56 million to €1.4 billion.
Fourth-quarter sales in the Functional Materials & Solutions segment decreased by 1% to €4.1 billion. Higher volumes were offset by negative currency effects. Healthy demand from the automotive industry led to the volume growth. EBIT before special items increased by €10 million to €238 million thanks to higher earnings in the Catalysts and Coatings divisions. For the full year, sales rose by 1% to almost €17.3 billion primarily due to higher volumes. EBIT before special items of about €1.1 billion was €138 million above the previous year.
Despite significant adverse currency effects, sales in the Agricultural Solutions segment increased by 1% to €890 million in the seasonally slow fourth quarter. The increase was driven by the acquisition of Becker Underwood as well as slightly higher volumes and prices. EBIT before special items doubled to €67 million due to higher margins and the acquisition of Becker Underwood. At €5.2 billion, sales in the full year grew by 12% compared with the previous year. EBIT before special items increased by €185 million to €1.2 billion primarily thanks to higher volumes and prices.
In the Oil & Gas segment, sales grew by 10% to €4.2 billion in the fourth quarter. This was mainly due to a higher contribution from the acquired assets in Norway and increased production volumes from Achimgaz as well as higher sales volumes in Natural Gas Trading. EBIT before special items grew by €128 million to €535 million. The Norwegian fields contributed to this considerable increase. Sales for the full year rose by 16% to around €14.8 billion mainly due to increased volumes. At almost €2.0 billion, EBIT before special items exceeded the previous year’s level by €93 million. Net income improved by €579 million to around €1.8 billion.
Sales in Other increased by 7% to €1.1 billion in the fourth quarter. The ELLBA joint ventures for styrene monomer and propylene oxide in Europe and Asia contributed strongly to sales growth. EBIT before special items declined by €47 million to minus €114 million. Full-year sales grew by 3% to €4.2 billion compared with the previous year. EBIT before special items improved to minus €618 million compared with minus €790 million in 2012.
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