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BASF profits plunge
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November 11, 1999: 7:00 a.m. ET
German chemical giant's earnings fall 52% in 3Q amid vitamin suit costs
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LONDON (CNNfn) - German chemicals giant BASF suffered a sharp decline in profits in the third quarter, hit by a 273 million pound charge to cover the cost of a U.S. antitrust lawsuit involving allegations of price-fixing in its vitamins business.
Operating income at BASF, one of the world's top chemical companies, plunged 52.2 percent to 322 million euros in the quarter, substantially below analysts' expectations for earnings ranging from 469 million euros and 840 million.
Net income after taxes and other charges fell 77.1 percent to 112 million euros. Stripping out taxes, the lawsuit charge, and other special items, yielded a 17 percent rise in income to 624 million euros for the company.
Sales rose 12.2 percent in the quarter to 7.25 billion euros, with all the company's principal business segments reporting higher revenues. The company said it expects the business outlook to improve further in the fourth quarter as it forges ahead with new a joint venture with Royal Dutch/Shell and restructures its fertilizer and textile dye businesses.
The weaker-than-expected results initially pulled BASF (FBAS) stock down as much as 2.4 percent in Frankfurt to its lowest level in a week, at 41.50. By mid-morning, the shares had pared some of their losses to trade down less than half a percent, at 42.35 euros.
BASF said in a statement Thursday it had set aside special-item provisions of 330 million pounds in the third quarter, of which the 273 million pound lawsuit charge constituted the heftiest chunk.
The results came a week after BASF and six other vitamin makers agreed to pay $1.05 billion to settle charges brought by the U.S. government that the companies had colluded to fix prices on bulk vitamins used in common foods and animal feeds.
The other defendants in the suit were Roche Holding, Hoechst AG, Rhône-Poulenc, Takedo Chemical Industries Ltd., Eisai Co. Ltd. and Daiichi Pharmaceutical Co. Ltd.
BASF's portion of the settlement totaled $287 million, though the company still faces further antitrust scrutiny pending European Union probes. BASF said additional provisions may be required to cover the costs of these and other pending lawsuits.
"It is not possible at the moment to estimate the potential costs, so provisions for these matters have not yet been established," the company said.
Separately, BASF noted it had completed the necessary modifications to its computers and process control systems to ensure readiness for the date changeover to the year 2000. Companies and governments around the world are scrambling to ensure their systems are Y2K compliant.
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BASF
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