Business Review Third Quarter 2015
In a weaker economic environment than expected, our sales in the third quarter of 2015 were slightly below the level of the previous third quarter. The sharp drop in the price of oil led to significantly lower prices, which weighed down our sales in the chemicals business1 and in the Oil & Gas segment. Income from operations before special items declined slightly. While we achieved a slight overall increase in the chemicals business, earnings fell considerably in the Oil & Gas and Agricultural Solutions segments as well as in Other.
Compared with the third quarter of 2014, our sales decreased by 5% to €17.4 billion, mostly due to lower prices in connection with the price of oil. This reduced sales in the chemicals business, particularly in the Chemicals segment. The Oil & Gas segment also saw a price-related sales decrease. Positive currency effects in nearly every division helped slow this decline.
We posted a €171 million decline in income from operations before special items, which amounted to €1.6 billion. In the chemicals business, the contribution from the Chemicals segment rose slightly while that of the Functional Materials & Solutions segment increased sharply, more than compensating for the significant decrease in the Performance Products segment. Earnings were considerably down in the Oil & Gas and Agricultural Solutions segments. The contribution from Other shrank considerably as a result of the lower amount of reversed provisions for our long-term incentive (LTI) program as compared with the previous year.
In a weaker economic environment than expected, our sales in the third quarter of 2015 were slightly below the level of the previous third quarter. The sharp drop in the price of oil led to significantly lower prices, which weighed down our sales in the chemicals business1 and in the Oil & Gas segment. Income from operations before special items declined slightly. While we achieved a slight overall increase in the chemicals business, earnings fell considerably in the Oil & Gas and Agricultural Solutions segments as well as in Other.
Compared with the third quarter of 2014, our sales decreased by 5% to €17.4 billion, mostly due to lower prices in connection with the price of oil. This reduced sales in the chemicals business, particularly in the Chemicals segment. The Oil & Gas segment also saw a price-related sales decrease. Positive currency effects in nearly every division helped slow this decline.
We posted a €171 million decline in income from operations before special items, which amounted to €1.6 billion. In the chemicals business, the contribution from the Chemicals segment rose slightly while that of the Functional Materials & Solutions segment increased sharply, more than compensating for the significant decrease in the Performance Products segment. Earnings were considerably down in the Oil & Gas and Agricultural Solutions segments. The contribution from Other shrank considerably as a result of the lower amount of reversed provisions for our long-term incentive (LTI) program as compared with the previous year.
Income from operations and special items
Special items in EBIT totaled €286 million in the third quarter of 2015, compared with minus €32 million in the third quarter of 2014. This was particularly the result of gains from the asset swap with Gazprom concluded at the end of September 2015.
Compared with the previous third quarter, EBIT grew by €147 million to €1,889 million. EBITDA grew by €358 million to €2,872 million. This was largely the result of a €211 million increase in depreciation, particularly in connection with investment projects.
Financial result and net income
At minus €175 million, the financial result was slightly below the level of the third quarter of 2014 (minus €169 million) due to lower income from shareholdings.
At €1,714 million, income before taxes and minority interests was up by €141 million. The tax rate was 26.0% (third quarter of 2014: 27.6%).
Net income rose by €195 million to €1,209 million.
Earnings per share were €1.31 in the third quarter of 2015, compared with €1.11 in the same quarter of 2014. Adjusted for special items and amortization of intangible assets, earnings per share amounted to €1.07 (third quarter of 2014: €1.24).
Outlook
In the first three quarters of 2015, growth in the global economy, global industrial production and the chemical industry remained considerably below our expectations. The economic environment clouded over in important emerging markets, especially in China.
For the 2015 business year, we now expect a more challenging economic environment than had been anticipated in the middle of the year. In addition to weaker economic development and the lower price of oil, the divestitures concluded in the third quarter of 2015 will put a strain on sales and earnings development. We are therefore adjusting our outlook for 2015. We now expect a slight decrease in sales and income from operations before special items.
Opportunities and Risks
Opportunities and risks to be found in overall economic development as well as in exchange rate and margin volatility.
In 2015, opportunities may arise for us from a revival of the global economy and from the development of key customer industries, as well as through exchange rate volatility and margin improvements.
Yet there are also risks to the development of our business. These include an economic slowdown in China and uncertainty as to growth in Europe. Risks also lurk in exchange rate and margin volatility as well as in the development of our key customer industries.
The statements on opportunities and risks made in the BASF Report 2014 remain valid.
source : Third Quarter 2015 Financial highlights, October 27, 2015
