In the first half of 2015, growth remained behind our expectations for the global economy as well as for global industrial and chemical production. This was primarily due to dampened economic developments in both the United States and China. We were nevertheless able to slightly raise our sales and, despite the sharp drop in oil prices, achieve earnings at the same level as the first half of 2014.
For the full year 2015, we now expect somewhat weaker growth for the global economy as well as global industrial and chemical production than was foreseen six months ago. Despite continuing high risks, we stand by our outlook for 2015: We aim to perform well and slightly increase sales in a volatile and challenging environment. We are striving for income from operations before special items that matches the level of the previous year.
Opportunities and Risks
- Overall economic development together with exchange rate and margin volatility present both opportunities and risks
In 2015, opportunities may arise for us from the continued growth of the global economy and from the development of key customer industries, as well as through exchange rate and margin volatility.
We also see opportunities in the implementation of our “We create chemistry” strategy and in further improving our operational excellence, as well as strengthening research and development. We continue to concentrate on expanding our business in growth markets as well as on innovations, portfolio optimization, restructuring and increasing efficiency. Our STEP excellence program, for example, serves to strengthen our competitiveness and profitability. Starting at the end of 2015, STEP is expected to contribute around €1.3 billion to earnings each year. STEP comprises over 100 individual projects and is running right on schedule.
Yet there are also risks to the development of our business. These include an economic slowdown in China and uncertainty as to growth in Europe. Risks can also lurk in exchange rate and margin volatility as well as in the development of our key customer industries.
The statements on opportunities and risks made in the BASF Report 2014 remain valid.
- Slight sales growth expected for 2015
- Income from operations before special items likely to match level of 2014
We have reduced our expectations for the global economic environment in 2015 (previous forecast in parentheses):
- Growth of gross domestic product: 2.4% (2.8%)
- Growth in industrial production: 2.9% (3.6%)
- Growth in chemical production: 3.8% (4.2%)
- An average euro-to-dollar exchange rate of $1.15 per euro ($1.20 per euro)
- An average oil price for the year of $60 to $70 per barrel
We expect BASF Group sales to increase slightly in 2015, primarily supported by the sales growth anticipated in the Functional Materials & Solutions and Performance Products segments. We want to raise our sales volumes overall, excluding the effects of acquisitions and divestitures. Income from operations before special items in 2015 will likely match the previous year’s level. We foresee larger contributions from our chemicals and crop protection businesses, whereas earnings in the Oil & Gas segment are likely to fall considerably due to the lower price of oil. We expect a slight decline in income from operations. In 2014, high levels of special income had been achieved primarily through the disposal of our 50% share in Styrolution Holding GmbH. As a result, there is likely to be a considerable decline in EBIT after cost of capital.