2nd UPDATE: BASF Says Unit May Top '09 Adjusted Ebitda Margin Aim
May 19 2009 - 12:46PM
Dow Jones News
BASF SE's (BAS.XE) crop protection unit has a good chance of
surpassing its 2009 adjusted earnings before interest, taxes,
depreciation and amortization, or Ebitda, margin target, the head
of BASF's crop protection division Markus Heldt told Dow Jones
Newswires in an interview.
With the crop protection unit showing a positive development for
2009, the German chemicals company predicts it will exceed its goal
of an adjusted Ebitda margin of 25% for the full year, he said. In
2008, the margin was 26.6% after 23.2% in 2007.
The unit, which develops and produces innovative active
ingredients and formulations for the improvement of crop quality
and yields, increased first-quarter sales in both fungicides as
well as herbicides, he said.
"It is important that we transfer the positive start of the
business [this year], particularly in the northern hemisphere, onto
the field," Heldt said. Initially, the strong demand was mainly
driven by dealers and now this needs to be continued through
farmers buying the products and putting them into action, he
noted.
"We now see the main applications being used on the field. We
see a strong demand there, also driven by the first quarter,
particularly for the innovative, new solutions." He said: "we
expect a fundamentally positive development of sales and earnings
for the full year," adding it is still too early for a detailed
guidance.
In 2008, the unit's revenue was EUR3.41 billion and adjusted
earnings before interest and taxes was EUR706 million. The unit
thus contributed about 5% to the group's EUR62.3 billion sales in
2008. BASF is the world's number four in crop protection according
to sales, behind Syngenta AG (SYT), Bayer AG (BAY.XE) and Monsanto
Co (MON).
Heldt was confident on the price development of crop protection
goods after the unit raised prices by 7% across the portfolio in
the first quarter. The company plans to further increase prices to
at least partially offset higher re-registration costs in Europe,
he said.
The economic and financial crisis hurts crop protection
significantly less than it hurts other chemical businesses, Heldt
said. "We generally see that the agro and crop protection
operations are more robust with regard to the cycles than our
colleagues in the chemical area experience."
Heldt noted that particularly in central and eastern Europe, the
agricultural and liquidity situation has deteriorated due to the
financial crisis. It has also become more difficult in parts of
Latin America, mainly in Argentina and Brazil. The affected regions
make up about 20% to 25% of its crop protection sales.
"We try to do a better job [in these regions] by improving risk
management and through more careful customer management. With
regard to accounts receivables, we've seen a very good performance
in the agro business at the end of April compared with other BASF
units."
"In fungicides and herbicides, with the current portfolio and
our innovations, we have a broad and very robust portfolio," Heldt
said, adding that the strategic gap remains insecticides.
"We are on the look-out here," he said. Should an equally
attractive opportunity arise like the Fipronil acquisition from
Bayer in 2003, "we would certainly be interested." BASF paid about
EUR1.2 billion for Bayer's Fipronil package in 2003.
Company Web site: www.basf.com
-By Heide Oberhauser-Aslan, Dow Jones Newswires; +49 69 29725
500; heide.oberhauser@dowjones.com