(Updates with company comment in final two paragraphs.)
Feb. 24 (Bloomberg) -- BASF SE, the world’s largest chemical maker, predicted its run of record earnings and revenue will extend to a third consecutive year after emerging markets in Asia helped sales beat analysts’ estimates.
Fourth-quarter revenue gained 10 percent to 18.1 billion euros ($24 billion), BASF said today, beating the 16.95 billion- euro average analyst estimate. Investors will receive a dividend of 2.50 euro a share, more than the 2.40 euros analysts predicted. BASF stock rose as much as 2.9 percent.
Chief Executive Officer Kurt Bock, who in November raised a sales target for the end of the decade, forecast the global economy will pick up speed after a “moderate” start to 2012, helping the company improve on last year’s result. Nine months into his CEO role, Bock is pushing ahead with a plan to lessen BASF’s exposure to economic shifts and focus on innovation while cutting a further 1 billion euros in costs.
“Bock is very goal oriented and has both legs firmly on the ground,” said Oliver Schwarz, an M.M. Warburg analyst in Hamburg with a “hold” recommendation on the stock. “The outlook was surprisingly positive and the dividend was also pleasing.”
Shares of Ludwigshafen, Germany-based BASF have climbed 21 percent this year, giving the company a market value of 60.1 billion euros. The stock traded up 1.1 percent at 65.30 euros at 4:10 p.m. in Frankfurt after rising to as high as 66.48 euros. DuPont Co. has added 12 percent in 2012 and Dow Chemical Co. has gained 18 percent.
Raw-material inflation was largely passed on to clients through higher pricing, BASF said. Increased global capacity in toluene diisocyanate for polyurethanes prevented BASF clawing back higher input costs in that area by charging customers more, it said.
“We’re having to fight very heavily to increase our prices,” Bock said in a Bloomberg Television interview. “The second half should show a bit more of a tailwind for our business.”
The price of oil is a “big concern” and the company has based forecasts for this year on an average price of $110 a barrel for Brent, Bock said today. Brent oil for April settlement advanced 7 cents to $123.69 a barrel on the London- based ICE Futures Europe exchange.
All Divisions Contribute
BASF expects all divisions, except basic chemicals, to contribute to profit growth this year. Pressure on margins for petrochemicals and intermediates will mean lower profitability for that unit, even as sales gain, BASF said. The company forecast higher demand from the construction and auto industries.
Net income rose 2.8 percent to 1.13 billion euros, beating an estimate of 931 million euros. Earnings before interest, tax and one-time items fell 15 percent to 1.51 billion euros.
The manufacturer is increasing research and development spending 6.3 percent to 1.7 billion euros this year. The chemical maker and western competitors are focusing on technology to fend off expansion by low-cost Asian and Middle East petrochemical makers. The German company is targeting 300 million euros in annual sales from the wind-energy market by 2020, supplying coatings and foams for turbines and towers.
Recent acquisitions have accelerated the shift toward specialty chemicals at BASF, which uses refined oil products and natural gas as a base for petrochemicals. Those in turn are used in products ranging from plastics to shampoo and car paint ingredients. The German company bought Cognis Holding GmbH in 2010 for $3.8 billion to boost its cosmetic ingredients operations, and dye-maker Ciba the year before for $5 billion.
The chemical maker may resume bigger acquisitions after saying last week that it had completed the integration of Cognis. BASF said on Feb. 21 that it agreed to buy, for an undisclosed sum, Merck KGaA’s battery-electrolyte unit to add technology used for lithium ion batteries and in electro- mobility.
Bock said today that BASF has the financial means to make acquisitions and is “constantly on the outlook” for transactions.
The company will screen existing units for profitability and potential and may sell divisions that don’t measure up, the CEO said in November. Three nitric acid plants will be divested in 2012 as part of an exit from fertilizers, BASF said today.
BASF, which plans to expand 2 percentage points faster than global chemical production, is also forecasting earnings and sales increases in 2013, assuming that North America’s market continues growing and that the sovereign-debt crisis doesn’t intensify in countries using the euro, the company said today in its annual report.
The manufacturer only made a prediction for 2013 because the law requires it, Bock said at a press conference in Ludwigshafen. At this time next year, BASF will be in a better position to specify a forecast, he said.
--With assistance from Mark Barton in London. Editors: Tom Lavell, Robert Valpuesta
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