BASF Q2 profit dips amid patchy global economy

AP News
Posted: Jul 25, 2013 4:01 AM

FRANKFURT, Germany (AP) — Chemicals and oil company BASF SE warned Thursday that it will find it more difficult to achieve its full-year profit target as it reported a 4.2 percent fall in second-quarter earnings due to weaker demand in an uneven global economy.

Following the warning, BASF shares fell 4 percent to 67.09 euros in morning trading in Frankfurt.

Net profit fell 4.2 percent to 1.16 billion euros ($1.53 billion) even as revenues rose 2.9 percent to 18.35 billion euros.

The company, based in Ludwigshafen, Germany, said it saw thinner profit margins on some products in its basic chemicals division such as caprolactam, the raw material for a widely used form of nylon that goes into everything from lingerie to tires.

It also said its business in more extensively processed chemical products saw "intense competition in some product lines." That division also saw euro earnings reduced by a weaker yen, while its year-earlier earnings were boosted by insurance payments for damage suffered from Japan's earthquake and tsunami disaster.

CEO Kurt Bock said the economic environment "remains volatile" with the European economy waning and China "no longer running at full power" at a time when the U.S. expansion was only moderate. The company was "clearly feeling these effects," he said.

Bock said the company still expected to increase sales and earnings this year but that achieving that target "is significantly more challenging today" than expected at the beginning of the year.

BASF lowered its estimate for global economic growth this year to 2.0 percent from 2.4 percent and for industrial production to 2.7 percent from 3.4 percent.

The company makes raw materials for a huge range of products including pharmaceuticals, plastics, textiles, paint, auto parts, and construction materials. It also produces farm chemicals and oil and gas.