We expect conditions to remain challenging in 2016. The global economy and industrial production will presumably grow at a level approximating that of 2015. Chemical production is likely to grow at a slower rate than in 2015. For 2016, we assume an average price of $40 for a barrel of Brent blend crude oil and an exchange rate of $1.10 per euro. The global economy continues to face increasing risks. 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 as well as lower oil and gas prices. We expect income from operations 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 oil price developments.
Sales and earnings forecast for the BASF Group
- Considerable sales decline due to divestiture of gas trading and storage business
- Income from operations before special items expected at level slightly below 2015
BASF Group sales will decrease considerably in 2016. As a consequence of the asset swap with Gazprom, contributions to the Oil & Gas segment have ceased from the natural gas trading and storage business in particular. In the first three quarters of 2015, these activities contributed a total of around €10.1 billion to sales. Sales will be furthermore reduced by lower prices for oil and gas. We want to increase sales volumes in all segments, excluding the effects of acquisitions and divestitures. Income from operations before special items is expected to be slightly below 2015 levels. This is an ambitious goal in the current volatile and challenging environment, and is particularly dependent on oil price developments. We anticipate considerably lower contributions from the Chemicals and Oil & Gas segments. In the other segments, we aim to slightly increase earnings.
We expect EBIT to decline slightly overall in 2016. In addition to a lower level of EBIT before special items, this assumption reflects the charges expected to arise from restructuring measures. The contribution from the Oil & Gas segment is likely to shrink considerably in 2016; we anticipate a slight decrease in the chemicals business1 and a slight gain in the Agricultural Solutions segment. In Other, EBIT is forecast to rise considerably. Yet because EBIT of Other is not factored into the calculation of our EBIT after cost of capital, the BASF Group’s EBIT after cost of capital will presumably see a considerable decline. We will still earn a premium on our cost of capital. In the Performance Products, Functional Materials & Solutions, and Agricultural Solutions segments, we anticipate a considerable boost in EBIT after cost of capital.
The significant risks and opportunities that could affect our forecast are described in the Opportunities and risks report.
1 Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.