By Christopher Alessi
MANNHEIM, Germany--German chemicals giant BASF SE on Thursday
posted a near 20% decline in net profit for the first quarter of
2015, hurt by the low price of oil and charges related to the
company's share-based compensation program.
Net profit for the period ended March 31 was EUR1.17 billion
($1.3 billion), compared with EUR1.46 billion last year, missing
analysts' forecasts of EUR1.26 billion, according to a recent poll
by The Wall Street Journal.
Sales rose by 2.8% to EUR20.07 billion, boosted by currency
gains and higher volumes.
BASF's closely watched earnings before interest and taxes before
special items declined by 2% to EUR2.07 billion, largely
attributable to the group's positive share price performance, which
increased provisions to EUR230 million for its share-based
compensation program.
The company's shares had risen by roughly 32% over the first
quarter, BASF said. They were up marginally midmorning
Thursday.
BASF reiterated its guidance for 2015, saying it expects EBIT
before special items to stay flat year-over-year, at around EUR7.36
billion, while group sales should increase slightly.
The company's earnings have come under pressure over the past
two quarters because of a fall in global oil prices.
BASF's wholly-owned oil and gas division, Wintershall AG,
reported a 16% slide in net profit this quarter, to EUR359 million.
The low oil price forced the company to curtail its activities in
the exploration and production segment of the business. This
weakness was partially offset by higher volumes in the natural gas
trading sector.
Germany's largest crude oil and natural gas producer,
Wintershall contributes around 30% to BASF's total cash flow. The
division faces an approximate earnings loss of EUR20 million for
every $1 decrease in the average annual price of Brent crude oil,
according to the company.
Brent crude, the global benchmark, fell around 50% from the
first quarter of 2014 to the first quarter of this year. It has
risen slightly in recent weeks and was trading at around $65 a
barrel on Wednesday.
The low price of oil also brought down prices for basic
chemicals that rely on it as a main ingredient, such as
petrochemicals, adversely affecting sales. The basic chemicals unit
reported a 12% fall in sales this quarter to EUR3.87 billion.
However, higher margins for steam cracker and ethylene-based
products in Europe--due to lower raw material costs--boosted
earnings in the division, with EBIT before special items rising 21%
to EUR726 million.
BASF's specialty chemicals businesses and agricultural chemicals
business all saw earnings rise, in part a result of favorable
currency exchanges because of a weaker euro and stronger U.S.
Dollar.
Write to Christopher Alessi at christopher.alessi@wsj.com
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