BASF Faces Poor Growth in Second Quarter

Published Date : Jul 24, 2015

Dip in demand in second quarter has led BASF to warn that slumping economy would make it difficult to achieve the company’s yearly targets. The German chemical manufacturer, which is also the largest global chemical maker in terms of sales, had earlier projected the expansion of global gross domestic product by 2.4% in 2015. However, low demand has made the chemical producer to tone down its previous forecast. BASF expects worldwide chemical production to grow at a rate of 3.8% in 2015 instead of 4.2%.

According to Kurt Bock, the chief executive of BASF, the company has not achieved any significant growth in the second quarter in a row. He also mentioned that the chemical manufacturer’s rivals are also facing similar issues. With little growth dynamic offered by the market presently, the customers are cautious about building up inventories. He pointed out that the operating profit would stagnate in 2015 whereas sales would register a slightly higher figure than that compared to a year ago. The yearly targets committed by the chemical manufacturing giant earlier have become challenging to achieve. Factors such as slowdown in China, recession in Brazil and Russia, and slow GDP growth in the U.S. have led to the dip in the company’s sales figures. BASF’s earnings from oil and gas have been affected by 44% decline in oil prices compared with that of a year ago. BASF’s stock witnessed a decline of 15% in the second quarter.

In the second quarter, the group’s operating profit has slightly rose to €2 billion whereas revenues increased by 3% to €19.1 billion. Chemical revenues have faced the brunt with 8% decline in the second quarter owing to lower prices. In the absence of significant growth, the company is focussing on building its portfolio and restructuring underperforming units.