- Outlook confirmed: we aim to improve sales and earnings and expect to earn a high premium on our cost of capital
- Opportunities can arise from stronger growth in the global economy and in our customer industries
- New strategic excellence program, STEP, will help strengthen our competitiveness and profitability
- Risks arise from, for example, the national debt crises in Europe and the United States as well as from inflationary trends in Asia
Opportunities and risks
In 2012, we may be presented with opportunities arising from stronger growth in the global economy and our customer industries. Furthermore, a stronger U.S. dollar would have positive effects on our earnings.
We also see opportunities in the implementation of our “We create chemistry” strategy, further improving our operational excellence and strengthening our research and development activities. We will continue to concentrate on portfolio optimization, restructuring and increasing efficiency as well as on product innovations and expanding our business in growth markets. For example, the new strategic excellence program STEP serves to strengthen our competitiveness and profitability. It is expected to contribute around €1 billion to earnings each year by the end of 2015. STEP – which follows on from our excellence program NEXT, completed in 2011 – comprises more than 100 projects that aim to lower costs and raise profit margins.
However, there are also risks to the development of our business. Economic growth could be impaired by the national debt crises in Europe and the United States as well as by inflationary trends in Asia. Increasing raw material costs could also negatively affect our margins and dampen demand.
The statements on opportunities and risks made in the BASF Report 2011 remain valid.
Our expectations for the global economy in 2012 remain unchanged:
- Growth of gross domestic product: 2.7%
- Growth in industrial production: 4.1%
- Growth in chemical production: 4.1%
- An average euro/dollar exchange rate of $1.30 per euro
- An average oil price of $110/barrel in 2012
Excluding the effects of acquisitions and divestitures, we aim to increase our sales volumes. We will strive to exceed the 2011 record levels in sales and income from operations. Our forecast will be especially supported by the resumption of our crude oil production in Libya as well as by growing volumes in the chemicals business.
In the first half of 2012, we are unlikely to match the extraordinarily good levels of the same period of the previous year. For the second half, however, we expect an increase in sales and earnings compared with the second half of 2011. We aim to earn a high premium on our cost of capital once again in 2012.