The market environment continued to be volatile and challenging. Growth rates for the global economy, industrial production and the chemical industry in 2015 all lagged considerably behind the company’s expectations. “Over the course of the year, global economic growth slowed significantly. In this economic environment, we have taken decisive measures: We have significantly reduced our inventories, strengthened our cost management and pruned our portfolio,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE at the Annual Press Conference in Ludwigshafen.

In the fourth quarter of 2015, sales were €13.9 billion, 23% below the level of the same quarter of the previous year. This was mainly due to the asset swap with Gazprom, which was completed at the end of September. As a result of the swap, the sales contribution of roughly €3 billion from the gas trading and storage business ceased in the Oil & Gas segment in the fourth quarter of 2015. In total, portfolio measures in the fourth quarter reduced sales by 19%. Due to lower raw material prices, sales prices declined by 11%; volumes grew by 4%. Positive currency effects contributed 3%.

Income from operations (EBIT) before special items fell by €436 million to about €1 billion in the fourth quarter. The decline was especially due to significantly lower earnings in the Oil & Gas and Chemicals segments compared with the previous fourth quarter. Earnings in Oil & Gas decreased primarily due to lower prices, whereas in the chemicals segment the decline was mainly attributable to lower margins in the petrochemicals division.

Sales and earnings in 2015 below previous year mainly due to lower oil and gas prices

For the full year, sales decreased by 5% to €70.4 billion. Sales prices fell in almost all divisions (minus 9%), largely on account of the sharp drop in raw material prices. Sales volumes in 2015 rose slightly overall (plus 3%), mainly as a result of higher volumes in the Oil & Gas segment. Volumes in the chemicals business, which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments, were almost at the same level as the previous year. Volumes and prices rose in the Agricultural Solutions segment. Currency effects positively influenced sales in all segments (plus 6%). The asset swap with Gazprom reduced sales (portfolio: minus 5%).

At €6.7 billion, EBIT before special items was €618 million below the level of the previous year. Major influences here were the oil-price-related decline in sales from oil and gas production activities as well as decreased earnings in Other, mainly brought about by currency effects. Contrasting this was the significant increase in earnings in the Functional Materials & Solutions segment.

At €6.2 billion, EBIT for the BASF Group in 2015 was €1.4 billion lower than the previous year’s level. Special items in 2015 resulted in an earnings impact to EBIT of minus €491 million compared to an earnings contribution of plus €269 million in 2014. This was mostly due to impairments of around €600 million on assets in the Oil & Gas segment, as a result of the strong decline in oil and gas prices in past months.

Net income amounted to €4.0 billion, below the previous year’s level of €5.2 billion. Earnings per share dipped from €5.61 to €4.34. In 2015, earnings per share adjusted for special items and amortization of intangible assets amounted to €5.00 compared with €5.44 in the previous year.

Outlook for full year 2016

According to Bock, the turbulent start to the year on the raw material and stock markets shows just how many uncertainties there are in an outlook for 2016. “The year has begun subdued, mainly due to a weak volume development in China. Nonetheless, in 2016 we still expect the global economy to grow at about the same rate as in 2015.” Growth in the European Union will remain comparable with prior-year levels. In the United States, growth is expected to slow down somewhat. The company forecasts that economic growth in China will continue to decelerate slightly and that the recession will ease up somewhat in Russia and Brazil. Global chemical production is likely to grow at a slightly slower rate than in 2015,” he added.

“Risks continue to rise for the global economy. We nevertheless aim to raise sales volumes in all segments. BASF Group sales will decline considerably, however, especially as a result of the divestiture of the gas trading and storage business. We expect EBIT before special items to be slightly below 2015 levels. This is an ambitious goal in the current volatile and challenging environment, and is particularly dependent on the development of the oil price,” said Bock. The company expects a significant decrease in the Oil & Gas segment. In the Chemicals segment, the good earnings of the first three quarters of 2015 will not be matched and a significantly lower contribution is expected. In contrast, BASF aims to increase earnings slightly in the remaining three segments.

In 2015, BASF invested around €5.2 billion in property, plant and equipment, compared with €5.1 billion in the previous year (excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments). The company presumes that average yearly investment between 2016 and 2020 will be lower compared with 2015, after having started up operations at several major plants. “The investment projects we have completed in the previous months negatively affect our earnings in this weak economic environment. However, they are the basis for future growth – in Europe, in North America and in emerging markets. The emerging markets provide great opportunities for BASF, even if they are growing more slowly than expected at the moment,” said Bock. For 2016, BASF plans total investments of around €4.2 billion. Compared with the previous year, the company thus aims to reduce capital expenditures by €1 billion.