BASF Raises Outlook after Rising Quarterly Profits


Germany's BASF raised its full-year profit outlook after strong demand for chemicals and farming products boosted quarterly profits at the world's biggest chemicals company by sales.

Like many peers, BASF has benefited from strong economic growth, especially in Asia, which has powered demand for basic chemicals for more than three years.

"We want to continue to grow faster than the market," BASF said in a statement accompanying its results.

Earnings before interest and tax (EBIT) before special items rose 6 percent to 1.7 billion euros ($2.5 billion), matching the average forecast in a Reuters poll of 14 analysts.

Third-quarter net profit almost doubled to 1.2 billion euros, boosted by a one-off 186 million euros tax credit following Germany's corporate tax reform. This was the 16th consecutive quarter of sales and earnings growth at BASF.

But BASF shares were weak after the results, down 2 percent at 96.34 euros at 1030 GMT, compared with a 0.8 percent dip in the DJ Stoxx European chemicals sector index.

Analysts said the results failed to excite investors with high expectations.

BASF Raises Guidance on 'Rock Solid' Earnings
BASF Raises Guidance on 'Rock Solid' Earnings

"There was no clear outperformance," said Heinz-Josef Stenten, an analyst at Generali Asset Management.

BASF, which spent 7 billion euros last year on acquisitions partly to reduce the cyclical nature of its earnings, said it now expected 2007 sales to rise to nearly 58 billion euros and EBIT before special items to be above the previous year's record.

BASF had previously expected significantly higher sales and EBIT before special items, at least matching 2006's record.

BASF's chemicals unit profited from robust demand for environmental products for use in cars and from high margins for ethylene, the basic petrochemicals feedstock. The unit's products range from petrochemicals to catalysts.

In addition, its herbicides, fungicides and insecticides products got a boost from a strong season in Latin America.

Rising demand for food, feed and widespread cultivation of plants for energy had led to rising agricultural prices. Farmers tend to boost crop yields with better agrochemicals products when agricultural prices are high.

This has benefited BASF and also rivals like Bayer CropScience and Swiss Syngenta.

Top rival Saudi Basic Industries Corp (SABIC) had reported a 37 percent jump in quarterly net earnings, while U.S. competitor Dow Chemical suffered profit declines because of a slump in North American housing markets.

SABIC is the world's biggest chemicals company by market value, and Dow is the largest in the United States.

BASF shares have risen about 33 percent this year, outshining a 21 percent gain in the sector as investors bet on sustained earnings growth at the 142-year-old company.

Shares in BASF, the seventh-best performing stock in the 22-stock sector, trade at 13 times forecast 2008 earnings compared with the European sector average of 16.3 times.