German chemicals company BASF (BASFY) (BFFAF) on Thursday reported a sharp drop in sales for the third quarter and earnings, but maintained its outlook for the year despite a devastating fire at its Ludwigshafen docks after the end of the reporting period.
It warned that the October 17 fire, which killed three people and severely injured eight others, will cause bottlenecks and adversely affect full-year earnings, but not affect the general outlook.
"We continue to expect EBIT before special items to be slightly below the level of 2015. This remains an ambitious goal in the current volatile and challenging environment, and in light of the fire of October 17 and its consequences," said CFO Hans-Ulrich Engel.
The announcement knocked about 1% off the company's share price on Thursday, bringing it down to €78.80 ($85.96) in early trading on Frankfurt compared with €79.57 at Wednesday's close.
BASF's adjusted earnings per share for the quarter at €1.10 came in three cents above the same period last year. But analysts had already been forced to adjust their estimates upwards after unexpectedly positive sales and EPS figures released in a preliminary announcement on Oct. 11, before the fire broke out. Earnings per share before special items were down to €0.97 compared with €1.31 last year
The company said sales for the quarter were €14.01 billion down from €17.42 billion a year ago. Net profit for the quarter was €888 million, down from €1.21 billion
The decline was mainly a result of divesting the gas trading and storage business as part of an asset swap with Russia's Gazprom (OGZPY) in September 2015. That knocked €2.9 billion off the comparable sales total for the quarter.
But BASF said part of the fall was also due to a drop in the price of BASF's chemicals and oil and gas products, due to falling raw material prices. Sales volumes were up 4%, however, primarily in functional materials and chemicals.
A hefty slab of restructuring measures and the loss of income from the asset swap with Gazprom meant Ebit fell to €1.46 billion from €1.89 billion a year earlier. Ebitda fell to €2.44 billion in the third quarter from €2.87 billion last year.
Net debt fell to €12.34 billion at the end of the quarter from €12.96 billion at the end of last year.
Explaining why it was maintaining its outlook for the year despite the devastating Ludwigshafen fire, BASF, said its lower level of "tied-down" operating capital meant it now expected operational earnings after the cost of capital to exceed the previous year, instead of a previously forecast decline. Its expectations for the global economic environment remained unchanged - including an assumed average euro/dollar exchange rate of $1.10. However, it did increase its assumed oil price from $40 to $45 per barrel.