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In the fourth quarter of 2017 BASF Group posted sales of 16.1 billion EUR

27.02.2018 08:45 "Agro Perspectiva" (Kyiv) — Following a successful 2017 business year, BASF has had a good start to the year 2018.

«Last year, we achieved significant growth and were able to further increase our profitability. Moreover, we laid important groundwork for the future development

of our company — in terms of both people and strategy,» said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE, at the presentation of the 2017 Annual Report in Ludwigshafen.

In the fourth quarter of 2017, BASF Group posted sales of 16.1 billion EUR, which represents growth of 8% compared with the same quarter of 2016. Prices rose by 9%. BASF’s sales volumes increased by 4%; this was driven by all segments with the exception of Oil & Gas. By contrast, negative currency effects were significantly higher and reduced sales by 5%. Income from operations (EBIT) before special items in the fourth quarter was 1.9 billion EUR, up by 58% from the same period of the prior year. The significantly higher earnings in the Chemicals, Agricultural Solutions and Oil & Gas segments as well as in Other compensated for lower earnings in the Functional Materials & Solutions and Performance Products segments.

Economic activity picked up in many countries worldwide in 2017. «We took advantage of this upturn and markedly increased our full-year 2017 sales and earnings compared with the previous year,» said Bock. Thanks to good demand, BASF sold greater volumes in all divisions and considerably increased its profitability. Higher prices, especially in the Chemicals segment, also contributed to this. Overall, BASF’s sales grew by 12% to 64.5 billion EUR. One contributing factor was the Chemetall business acquired at the end of 2016, which offers tailor-made solutions for metals surface treatment.

BASF’s earnings rose even more sharply, by around one-third. The company achieved EBIT before special items of 8.3 billion EUR, with a significant contribution coming from the Chemicals segment. Higher margins and volumes in the basic chemicals and intermediates businesses more than offset the lower margins in some of BASF’s specialties businesses. Earnings in the chemicals business — which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments — were significantly higher than in the previous year. EBIT before special items in this business was 7.3 billion EUR, up by 26% versus the prior-year figure.

Earnings per share increased from 4.42 EUR to 6.62 EUR, equivalent to a rise of 50%.

Adjusted for special items and amortization of intangible assets, earnings per share amounted to 6.44 EUR, compared with 4.83 EURin the previous year.

Outlook for the year 2018

For 2018, BASF expects the global economy and chemical production to grow at roughly the same pace as in 2017. Further growth is expected in all regions and BASF anticipates a continuation of the recovery already underway in Brazil and Russia. In addition to these generally positive baseline conditions, however, BASF also sees increased market volatility. Furthermore, the U.S. dollar is having a negative impact on sales and earnings.

For its outlook, BASF assumes the following economic conditions for 2018

(prior-year figures in parentheses):

Global economic growth of +3.0% (+3.1%)

Growth in global chemical production of +3.4% (+3.5%)

An average euro/dollar exchange rate of $1.20 per euro ($1.13 per euro)

An average oil price (Brent) of $65 per barrel ($54 per barrel)

«In this environment, we want to continue to grow profitably and achieve a slight increase in BASF Group’s sales and EBIT before special items in 2018,» said Bock.

The rise in sales should result chiefly from volumes growth. The increase in earnings will mainly be driven by significant contributions from the Performance Products,

Functional Materials & Solutions and Oil & Gas segments. After a strong result in 2017, the company expects considerably lower EBIT before special items in the Chemicals segment, primarily as a result of lower margins.

The forecast for 2018 takes into account the agreed acquisition of significant parts of Bayer’s seed and non-selective herbicide businesses, which is expected to close in the first half of 2018. Based on the timing of the acquisition, the seasonality of the businesses to be taken over and the anticipated integration costs, this is likely to have a positive impact on sales and a negative impact on earnings for the Agricultural Solutions segment and the BASF Group in 2018.

The forecast does not take into account the intended merger of the oil and gas activities of BASF and LetterOne. On signature of the transaction agreements, the Oil & Gas segment’s earnings would no longer be included in sales and EBIT for the BASF Group — retroactively as of January 1, 2018 and with the prior-year figures restated. Rather, this would be presented in the income before minority interests of the BASF Group as a separate item, «income from discontinued operations.» From the transaction closing date, BASF’s share of income generated by the joint venture — Wintershall DEA — would presumably be accounted for using the equity method and included in EBIT for the BASF Group/

Agro Perspectiva

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