- We aim for a significant improvement in sales and earnings and expect to earn a high premium on our cost of capital once again
- Oil production in Libya resumed on a limited scale in October 2011
- Risks include credit restrictions in China as well as debt crises in Europe and the United States
Opportunities and risks
We see opportunities for our business in consistently implementing our strategy and further improving our operational excellence. We will continue to concentrate on portfolio improvements, restructuring and increasing efficiency as well as on product innovations and expanding our business in growth markets. For example, the efficiency and cost-reduction program NEXT, begun in October 2008, will be brought to a close at the end of 2011 as planned. By the end of 2011, we expect an improvement in earnings of more than €800 million through the NEXT program. From the beginning of 2012, we expect an annual improvement of more than €1 billion in comparison with the base year of 2007. We will continue to strengthen our research and development activities.
However, there are also risks to the development of our business. Credit restrictions in China, as well as debt crises in Europe and the United States, could adversely impact economic growth. Increasing raw material costs could also negatively affect our margins and dampen demand.
The statements on opportunities and risks made in the BASF Report 2010 remain valid.
We have adjusted our forecast for the global economy in 2011 in response to developments in the third quarter and our expectations for the fourth quarter (previous forecasts in parentheses):
- Growth of gross domestic product: 2.5%–3% (3%–4%)
- Growth in industrial production: 4.5%–5% (5%–6%)
- Growth in chemical production (excluding pharmaceuticals): 4.5%–5% (5%–6%)
- An average euro/dollar exchange rate of $1.40 per euro
- An average oil price of $110 per barrel in 2011
In October 2011, we resumed crude oil production activities in Libya on a limited scale. Despite the overall reduced oil production, we expect significant sales growth for BASF Group in 2011.
Due to the suspension of crude oil production in Libya between February and October 2011, we expect non-compensable income taxes on oil-producing operations reported in income from operations will be around €700 million lower in 2011 (2010: €983 million). Adjusted for the non-compensable income taxes on oil-producing operations, we continue to aim to significantly exceed the record 2010 level in income from operations before special items. We will earn a high premium on our cost of capital once again in 2011.