Two largest German chemical groups BASF and Covestro are having boost in earnings as chemical prices rise. Ludwigshafen based group’s operating earnings rose by 16 per cent as solid volume growth was supplemented by higher sales prices for chemicals, said BASF chief executive, Kurt Bock.
Covestro the plastics company spun off from Bayer in 2015, was enjoying high growth as it rose 17 per cent in sales to €3.4bn said Patrick Thomas, chief executive.
Industry experiencing a wave of consolidation as net profit of Covestro rose 90 per cent and 50 per cent at BASF.
Earnings should be considerably above, rather than just slightly above, said CEO Mr. Bock who
upgraded BASF’s outlook for the second-half of 2017.
This month the company is paying €5.9bn to acquire “significant parts” of Bayer’s seed and non-selective herbicide business, their biggest acquisition in history.
BASF shares, fell nearly 1 per cent as the group posted disappointing earnings in its performance products division, whose products range from nutritional items such omega-3 fatty acids to mining products such as additives for drilling.
BASF finance chief,Hans-Ulrich Engel, was on conference call, told analyst that the cost of some raw materials in the area of crop protection were up to 20 per cent since the start of the year and the businesses are not able to pass these increases on.
Geoff Haire , UBS analyst said in the last five years Covestro is only European chemical company to announce a €1.5bn share buy-back programme, which is equal to 10 per cent of outstanding shares, that helped company’s stock prices to rise more than 6 per cent in Tuesday.
The Covestro board member Markus Steilemann, who will become chief executive in September 2018, credit the group’s success to a multiyear plan of focusing the portfolio on high-margin, fast-growing segments.
He added we are in the automotive, electronics and construction industries, focusing on transnational trends like electric mobility, energy-effective buildings and alternative energies including wind.
Mr Steilemann highlighted materials used for car batteries and radar systems used in self-driving technology. In the wind turbine area, he said Covestro had expanded from making coating applications to protect against weather to providing materials used for the core of the wind blade itself.
Polyurethane products, serve as variety of applications like bonding foam for construction, moulded foam for upholstery and high performance elastomers for industrial applications, was the major reason for last quarter’s sales boost.