German chemicals giant BASF reported quarterly earnings that easily beat forecasts thanks to strong demand for its products and buoyant profit from oil and gas, and kept its outlook for robust growth in 2004. BASF, the world's biggest chemicals company by sales, said in a statement on Thursday earnings before interest and tax (EBIT) before special items soared by more than two and a half times in the third quarter to 1.054 billion euros ($1.36 billion). Sales rose by 20 percent to 9.314 billion euros.
The results and outlook underlined a continuing upswing in the global chemicals market and followed strong results from BASF's US rivals Dow and DuPont.
"In one word, these results are compelling," said WestLB analyst Harald Gruber. "And this from a quarter that has traditionally been the weakest."
BASF repeated that it anticipated a significant increase in sales and EBIT before special items for the full year, adding that it expected to earn a premium on its cost of capital, which analysts say equates to a 10 percent return on invested capital.
But BASF shares, part of Frankfurt's blue-chip DAX index, were down 1.7 percent at 50.27 euros at 1355 GMT, under-performing the DAX.
Gruber and several traders said this was due to investors selling on the strong results after the stock gained 26 percent in the last six months and 9 percent in the last four weeks.
Some traders pointed to a slightly higher tax rate of 56 percent, and higher oil production taxes.
"There's a lot of uncertainty about where oil is headed and its impact on the economy and that's playing on the stock today, too," said a London-based dealer.
Chief Executive Juergen Hambrecht also told TV channel CNBC that he expected slower growth in the United States next year.
Strong demand and better product prices helped most of BASF's businesses overcome high oil prices, which in turn boosted earnings at its oil and gas unit, Wintershall.
Profits at the company's basic chemicals business more than tripled to 331 million euros, while earnings at plastics more than doubled to 158 million euros and rose at the oil unit by nearly 70 percent.
Volume growth was particularly strong in chemicals and plastics, and the company was able to lift prices by 22 percent in its plastics unit. Hambrecht said business in October had been strong, and there was no sign of inventory build-up.
"Supply-demand rates are tightening, and pricing power is good, and the chemicals upswing continues as long as demand remains strong," said Bankgesellschaft Berlin analyst Oliver Guenter.
A Reuters poll of 17 analysts yielded an average EBIT before special items of 823 million euros on sales of 8.66 billion.
According to Reuters Estimates, BASF shares trade at 14.7 times 2004 earnings, making them cheaper than Dow and DuPont.
"With results like these, the valuation gap between BASF and its American peers is a mystery," said Guenter.
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