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German firms' chemical sales started the year in decline
SALES | EARNINGS | CHANGE FROM 2015 | ||
---|---|---|---|---|
$ MILLIONS | SALES | EARNINGS | ||
BASF | $16,181 | $1,580 | -29.0% | 18.0% |
Bayer Group | 13,599 | 1,721 | 0.5 | 13.3 |
Covestro | 3,274 | 207 | -5.9 | 58.3 |
Evonik | 3,537 | 273 | -9 | -6 |
Linde | 4,854 | 379 | -0.3 | 2.8 |
Wacker Chemie | 1,496 | 18 | -1.5 | -77.2 |
The largest chemical companies in Germany, which has Europe’s biggest chemical industry, have experienced poor financial performance during the first three months of 2016, with sales down compared with the same period a year ago. The silver lining is that most of the firms still increased their earnings, in part due to cost savings. Some of the savings came from lower raw material costs on the back of cheap oil and gas.
BASF’s prices declined 6% in the first quarter as a result of oversupply in several markets with currency effects reducing sales by a further 1%. It now expects 2016 sales and profits to be lower than in 2015.
“In the first two months of the year, customers maintained a very cautious ordering approach. In March, however, business picked up in many of our divisions,” says Hans-Ulrich Engel, BASF’s chief financial officer.
Under its DrivE cost reduction program, BASF says it is on track to save $1.1 billion annually by the end of 2018 from a baseline of 2015.
Bayer recorded a slight increase in sales during the first quarter of the year with a strong showing from pharmaceuticals. But the firm’s CropScience division experienced a sales decline in the face of a “weak market environment,” says CEO Marijn Dekkers. Despite this, Dekkers is optimistic Bayer will improve its financial performance in 2016.
For Evonik, the first quarter was characterized by “challenging business conditions,” says Chairman Klaus Engel. On average, the firm’s selling prices for the quarter declined 7% compared with the same period one year earlier. In its Nutrition & Care business, lower volumes and declining world market prices resulted in a drop in both sales and earnings. Lower selling prices also adversely affected its Performance Materials business, the firm says. Despite the decline, Engel insists that “our business is still doing well and our products are in demand in the market.”
Gas firm Linde experienced “a stable start to the year, in line with our forecasts,” says Linde CEO Wolfgang Büchele. Challenges faced by Linde included adverse exchange rates and lower-than-expected sales and earnings from its engineering business, Büchele said.
Linde is forecasting a 4% increase in sales and earnings for full-year 2016, but Büchele also said, “the challenging market environment could result in a decrease of up to 3%,” Büchele says.
VCI, Germany’s largest chemical industry association, at the start of this year had predicted a 1.5% increase in the country’s chemical production for 2016, up from 1.0% growth in 2015. Also at the start of this year, Dekkers, speaking as VCI’s president, had predicted a “somewhat brisker business” environment for the German chemical industry in 2016.
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