US shines, but BASF's nutrition sales stagnate
to a successful second quarter, though the company's nutrition and
agricultural products division turned in a poor performance with
minimal sales growth and reduced earnings from the fine chemicals
sector.
The company's sales overall increased by almost 13 percent to $11.2 billion compared to the same quarter in 2003 and income from operations (EBIT) before special items climbed 44 percent to $1.45 billion.
However, sales in the nutrition and agricultural products sector increased by a mere 1.5 percent, making it the division with the smallest growth. BASF blamed this situation on the rising costs of raw materials and unsatisfactory vitamin prices - though sales in the area of human nutrition increased.
The division's earnings were also reduced by costs for the company's new plant in Ludwigshafen, which will enable it to expand its vitamin production. The new 40,000 metric ton plant for citral is expected to make the aroma chemical, the key component in vitamin A and E production, as well as carotenoids.
"These results give us reason to be optimistic, but without becoming euphoric," Dr. Jürgen Hambrecht, chairman of the board of executive directors of BASF. "We expect the high demand for our products to continue, but it will be a more moderate rate of increase compared to the first half, and uncertainties remain, in particular, the high energy and raw materials prices around the world."
Sales and earnings increased in all regions in the second quarter, but Asia and North America were the major growth drivers, with Europe lagging slightly behind in third place.
In North America, sales increased by more than 11 percent in terms of euros, and by more than 18 percent in terms of local currencies, while EBIT before special items increased by $180 million to $246 million.
For the rest of 2004, BASF plans to continue its strategy of restructuring and cost-cutting, though anticipates that pressure will continue to be exerted by the high cost of raw materials. The company also believes that Asia and North America will remain the strongest growth drivers.
"The programs that are currently being implemented will achieve cost savings of more than €700 million by the end of 2006," said Dr Hambrecht.
As regards the North America region in particular, BASF aims to reduce fixed costs by at least $250 million by 2006 and claims that the progress achieved to date will already result in cost savings of more than $175 million by the end of 2004.
