BASF fine chems sees results of efficiency measures

By Jess Halliday

- Last updated on GMT

Related tags: BASF, Engelhard

BASF's fine chemicals division has started 2007 with a sales
increase and earnings before interest (EBIT) up 191 per cent on Q1
2006, as its programme to increase efficiency presses forward.

Fine Chemicals, which falls under the German group's Agricultural Products and Nutrition segment, reported sales of €478m for the first three months of the year, compared to €488 for the comparative period of 2006. EBIT before special items was €32m, up from €11m, and EBITDA €55m, up from €40m. However this growth is consistent with BASF's recent quarters in that it was driven primarily by personal care - and in particular the acquired Engelhard Corp business, consisting of effect pigments and personal care materials. Recent financial reports have said that weak sales oflysineandcarotenoids, as well as a weaker custom synthesis business have had an impact on results - but BASF has been taking measures to address this situation.​ At the beginning of this month the group announced that it will be ceasing production of lysine at its plant in Gunsan, South Korea. ​ The move comes despite BASF having undertaken a cost reduction programme over the past three years. But rising raw material costs, overcapacities and high dependencies on export have at last led to the conclusion that the business is no longer sustainable. The closure also casts uncertainty over the future of its vitamin B2, which is also produced at the site. Other restructuring measures include the October announcement that the animal and human nutrition businesses under one marketing roof. In Agricultural Products, which sits alongside Fine Chemicals in the same unit, BASF reported a slight decline in sales from €928m in Q1 2006 to €897m this year. The slip is attributed to divestiture of large parts of the Micro Flo generics business, and global business with the active ingredients terbufos. But indications of market recovery in Brazil were a positive influence, with an increase in sales volumes - particularly for sugarcane products. Soybean also provided a boost, with gradual market recovery. The Agricultural Products and Nutrition results are set against a "powerful"​ backdrop of BASF's overall Q1 results, with a 17 per cent increase in sale to €14.6bn and 13 per cent EBIT increase to €2.1bn. BASF chairman Dr Juergen Hambrecht said: "The good start in the first quarter confirms our positive outlook for 2007. We expect significantly higher sales based on the acquisition made in 2006 and organic growth."

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