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BASF profit jumps on oil
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August 8, 2000: 8:36 a.m. ET
But shares fall as chemicals maker fails to raise full-year profit forecast
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LONDON (CNNfn) - German chemical maker BASF AG reported Tuesday that second-quarter profit before taxes more than doubled as sales got a boost from surging energy prices, but shares slid as investors were disappointed in the company's full-year outlook.
Europe's largest chemical firm also disclosed that it plans to take higher-than-expected restructuring costs in the second half of the year associated with its $3.8 billion ( 4.2 billion) purchase of the American Cyanamid agricultural business - the largest acquisition in its history - earlier this year. The company also said that while sales benefited from higher oil prices, raw material prices are cutting into earnings.
For the quarter, BASF (FBAS) saw pretax income rise to 954 million ($867 million), up about 150 percent from 380 million in the 1999 second quarter. On a net basis, second-quarter earnings soared more than 320 percent to 448 million. The results exceeded the average forecasts of industry analysts polled by Reuters.
Year-over-year results benefited from easy comparisons with the 1999 second quarter, which was dragged down by a 210 million U.S. penalty for allegedly conspiring to fix prices on bulk vitamins.
Sales rose 24 percent to 9 billion ($8.2 billion) during the latest quarter, thanks to the oil and gas and plastics divisions.
BASF's oil and gas company, Wintershall AG, which contributes about 10 percent of sales, saw operating profit nearly double to 247 million. The price of Brent crude oil soared 25 percent in the period between April 1 and June 30 to $30.57 a barrel.
At a news conference in London, CEO Juergen Strube reiterated that operating profit in 2001 is expected to rise 10 percent - disappointing some shareholders who had hoped for faster growth.
"Our planning will be based on strong demand in Asia and slightly less, but nevertheless still good, demand in Western Europe and the United States," he said.
BASF will take a one-time charge of about 400 million ($363.5 million) in the second half of 2000 connected to its purchase of American Cyanamid from U.S.-based American Home Products Corp. (AHP: Research, Estimates) in May and additional charges of about 120 million related to the sale of inventory.
Shares in BASF fell 6.4 percent to 42.30 in afternoon trading in Frankfurt. The exchange's benchmark Xetra Dax index, meanwhile, was flat.
For the first half of the year, BASF earned 1.88 billion ($1.71 billion) on a pretax basis, from 932 million in the first six months of 1999. First-half sales rose 24.5 percent to 17.4 billion. On an after-tax basis, profit increased 113 percent to 912 million.
German rival Bayer AG (FBAY) is expected to report first-half earnings on Thursday.
DuPont Co (DD: Research, Estimates), the world's biggest chemicals company, reported last month that second-quarter earnings rose 7 percent to $949 million, or 90 cents a diluted share, while U.S. rival Dow Chemical Co. (DOW: Research, Estimates), the No. 2 U.S. chemical company, announced second-quarter profits rose 26 percent, despite being hurt by rising costs for raw materials. 
-- from staff and wire reports
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BASF
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