By SHEENAGH MATTHEWS
BASF SE may undertake its single biggest plant investment to
date, spending more than 1 billion euros ($1.4 billion) to
target cheaper US shale gas with a facility to convert methane
to propylene used in coatings.
Plans for the new facility are being evaluated, the
Ludwigshafen, Germany-based company said in a statement. Until
now, the largest single-factory investment is BASFs 1
billion-euro plant in Ludwigshafen for toluene diisocyanate
(TDI), a component used in seating cushions and
BASF competitors have ramped up US expansion plans on the growth of
shale gas. Dow Chemical (DOW) Co. is adding plastics capacity
in the US, using the low-cost natural gas. Axiall Corp., North
Americas largest producer of vinyl building products, is
considering a $3 billion ethylene plant in Louisiana. The US
market produced BASFs fastest sales growth in euro terms,
with revenue rising 5% in the first quarter, it said
The production of propylene would allow us to take
advantage of low gas prices due to shale gas production,
considerably improve our cost position and improve our backward
integration in the US, Chief
Executive Officer Kurt Bock said in todays
The chemical maker will reduce the portion of investments
allocated to Germany to about a quarter from a third within the
next five years because of rising energy costs in its home
country, Bock said earlier this year.
First-quarter earnings before interest, tax and one-time items
fell 3.3% to 2.14 billion euros, beating a 2.12 billion-euro
analyst estimate in a Bloomberg survey. The company saw more
demand from the automobile and agricultural industries, it
The shares climbed 0.5% to 83.81 euros at 12:27 p.m. in
Frankfurt. The stock has gained 8.2% this year, giving it a
market value of 77 billion euros.
We had a good start to the year in our chemicals business
and in the agricultural solutions segment, Bock
Sales fell 1.1% to 19.5 billion euros in the quarter, compared
with a 19.3 billion-euro analyst estimate. Net income gained
2.1% to 1.48 billion euros.
BASF today reiterated a target for annual earnings to rise even
though its divesting a gas trading unit mid-year. Revenue
for the full year will probably decline slightly.
While the planned exit of gas trading and storage in the middle
of the year will reduce sales considerably, some of
that loss will be mitigated by growth in fungicides, herbicides
BASF is transferring its gas trading unit to OAO Gazprom (OGZD)
in an asset swap and in return will receive stakes in two
Siberian oil fields.
BASF plans 2,000 job cuts at its performance products unit,
which makes vitamins, ingredients for cosmetics and hygiene
products, Chief Financial Officer Hans-Ulrich Engel said on a
conference call today. Restructuring will save the unit 450
million euros to 500 million euros by 2016, Engel said.
The revamp affects all divisions within performance products,
including paper chemicals, pigments and nutrition units, and
will cost as much as 300 million euros, Engel said. Savings are
to help BASF reach an operating profit target of 22 billion
euros by the end of the decade.
The company is still concentrating on organic growth rather
than acquisitions, Engel said today.
If you look at what weve done over the last two
years and compare that to what we did in 2006 to 2010 and you
look at our stronger focus on organic growth, that gives you an
idea of the current mindset we are in, Engel said.
Under Bock, who has held the top job for three years,
BASFs largest acquisition was the $1.02 billion
acquisition of seed-treatment supplier Becker Underwood Inc. in
2012. That contrasts with BASFs purchases of catalytic
converter maker Engelhard Corp. for about $5 billion in 2006,
Swiss additive and dye maker Ciba for $5 billion in 2009 and
cosmetic-ingredient maker Cognis for $3.8 billion a year
BASFs supervisory board is proposing former CEO Juergen
Hambrecht as chairman at the annual shareholder meeting today.
The board is also suggesting British citizen Alison Carnwath,
an adviser to Evercore Partners, for the chemical makers
board for the first time. Current chairman Eggert Voscherau,
70, and Max Dietrich Kley, 74, are not available for
The shareholder meeting is in Mannheim, across the Rhine River
from BASFs Ludwigshafen headquarters.