MANNHEIM, Germany (Reuters) - Germany's BASF <BASF.DE>, the world's biggest chemicals company by sales, remains upbeat despite signs of a slowing global economy after posting strong first-quarter results that beat expectations.
By Mantik Kusjanto
MANNHEIM, Germany (Reuters) - Germany's BASF <BASF.DE>, the world's biggest chemicals company by sales, remains upbeat despite signs of a slowing global economy after posting strong first-quarter results that beat expectations.
"Our long-term strategy is paying off," Chief Executive Juergen Hambrecht said. "That's most apparent in turbulent times like the ones we're currently seeing in the financial markets."
BASF, which spent 7 billion euros in 2006 on acquisitions partly to reduce the cyclical nature of its earnings, said the strong start confirmed its positive outlook for 2008.
!ADVERTISEMENT!Hambrecht said BASF aimed to increase sales and improve income from operations before special items slightly in 2008, assuming that there were no changes to the company's portfolio.
BASF shares were indicated up 1.1 percent while the blue-chip DAX index <.GDAXI> was seen down 0.3 percent.
BASF's first-quarter earnings before interest and tax before special items rose 11.2 percent to 2.35 billion euros ($3.8 billion), beating the average forecast of 2.2 billion euros in a Reuters poll of 14 analysts.
Net profit rose 13 percent on the back of a 9 percent increase in sales thanks to rising oil prices and strong demand for its agrochemicals products.
"It's a strong performance. The results mix was better than expected," said Oliver Schwarz, an analyst at equinet.
Unlike other chemicals makers, BASF also produces oil so higher crude oil prices raised its profit in part of its business and lifted raw material costs at divisions that use oil-based products.
At the oil and gas business, operating profit before special items rose 16 percent to 984 million euros on the back of a 26 percent rise in sales.
BASF competes with rivals such as Dow Chemical <DOW.N> and Saudi Basic Industries Corp <2010.SE> for a slice of the 2 trillion euro chemicals market.
But analysts have said investments in chemicals are increasingly risky, partly because of an uncertain demand outlook, rising capacity in commodity chemicals, and the potential spread of the U.S. economic slowdown.
BASF shares have fallen about 9 percent this year, underperforming a 4 percent decline in the pan-European DJ Stoxx chemicals index on worries over slowing economies.
BASF shares trade at 11.5 times estimated 2008 profit, compared with the sector's 14 times.
(Editing by Louise Ireland)
