Global demand drives earnings for German chemical groups

29th July 2010, Comments 0 comments

German chemical groups posted solid results Thursday on sustained demand worldwide and a weaker euro, giving confidence a boost after last year's difficult times.

Although company executives warned the second half of 2010 would bring less impressive figures, a key sector of Europe's biggest economy has clearly benefited from a pick-up in business activity in many parts of the globe.

The world's biggest chemical group, BASF, posted better-than-expected results with net profit leaping to 1.18 billion euros (1.53 billion dollars) from 343 million euros in the same period a year earlier, a statement said.

Analysts polled by Dow Jones Newswires had expected a more modest, though still strong, increase to 988 million euros.

The group's core chemical and plastic activities rebounded sharply, while earnings from agriculture-related products were weaker. Overall sales up 29.7 percent at 16.2 billion euros.

"These developments were especially due to very high demand in the chemicals businesses," a BASF statement said.

Analysts at the German bank Merck Finck noted the group's output capacity had reached its limit in certain sectors.

BASF chairman Juergen Hambrecht noted however that "we have not yet regained the level that we had before" the global economic crisis of 2008-2009, and said "you cannot estimate (results for) the year by multiplying the first half by two."

He noted that the cost of raw materials would rise and growth in the United States could slow down.

Meanwhile, a smaller German chemical group, Merck KGaA, said its operating profit soared 76 percent to 325 million euros in the quarter, while net profit gained 69 percent to 183 million euros.

The strongest gains were posted by Merck's chemical unit and one that makes liquid crystals for television screens, with sales at the latter gaining 50 percent and operating profit jumping three-fold.

Merck raised its full-year forecast for operating profit to an ambitious gain of 90 percent from the previous outlook of 30-40 percent, and said sales should climb by 21 percent.

"The pleasing results of the second quarter, with total revenues well over two billion euros, show that our excellent first quarter was setting the course for the year," Merck chairman Karl-Ludwig Kley was quoted as saying.

Elsewhere, Bayer said group sales increased by 14.6 percent to 9.1 billion euros, led by a rebound at its chemical division, which offset weaker results from the pharmaceutical and agro-chemical units.

Bayer's MaterialScience division posted sales of 2.69 billion euros, up from 1.83 billion euros in the second quarter of 2009.

"This very gratifying improvement was due especially to the considerable increase in demand in our primary customer industries," Bayer chairman Werner Wenning said.

Prices for polyurethane-related products increased in the Asia-Pacific region and in Europe, a statement said, but they declined in North and Latin America.

"Business with raw materials for coatings, adhesives and specialties also trended successfully," Bayer said.

Shares in the three groups advanced in midday trading on the Frankfurt stock exchange, with Merck leading the market higher with a jump of 5.45 percent to 67.70 euros.

Bayer advanced 1.49 percent to 44.85 euros, with BASF up 1.04 percent at 45.80 euros.

The DAX index of German blue-chips was 0.64 percent higher overall.

© 2010 AFP

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