Neville Prior 26 July 2012 02:15:41 PMGerman chemical and oil company BASF SE warned on growing global economic risks and a slowdown in China as it reported a 15.5 percent drop in second-quarter net earnings. BASF said Thursday that it earned €1.23 billion ($1.49 billion) in the April-June quarter, down from €1.45 billion a year earlier. Revenue climbed 5.5 percent to €19.48 billion from €18.46 billion. The company held on to its outlook for the year, but scrapped its estimates for global growth and worldwide chemical and industrial production. In particular, it said that growth was easing in China, which has powered the global economy recently while Europe has struggled and the U.S. experiences an uncertain recovery. The company said that "the Chinese growth engine has started to stall" and that it saw a fall its sales revenues in the Asia region, as it did in the first quarter.
BASF has a good view of the global economy because it makes a vast lineup of chemicals that are raw materials for industries such as carmaking, electronics, textiles and pharmaceuticals. It also produces oil and gas.
The company announced Thursday that it had cut its forecast for this year for global growth from 2.7 percent to 2.3 percent. It also cut its forecast for industrial production from 4.1 percent to 3.5 percent. It said it "does not expect an upturn in demand in the second half of 2012." Sales volumes declined in its chemicals business, it said. The main contribution for the increase in first-half global sales came from its agricultural business, which makes pesticides, herbicides and fungicides, and from its oil and gas business due to higher oil prices. Oil and gas has also been boosted by resumption of production in Libya, where the fighting that overthrew leader Moammar Gadhafi interrupted work. The company held with its outlook for increased sales and earnings for this year. But it said that it was "unlikely" that the chemicals part of its business would equal last year's earnings.
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