Significant Events and Economic Environment
Significant Events, 2nd Quarter 2015
- Inauguration of production complex for acrylic acid in Camaçari, Brazil, and of polymerization plant for Ultramid® in Shanghai, China
- Portfolio optimization through divestitures in Oil & Gas and Performance Products segments
With the inauguration of our production complex in Camaçari, Brazil, we are now operating the first world-scale production plants for acrylic acid and superabsorbents in South America. This represents BASF’s largest single investment in the region to date. The production complex, with its annual capacity of 160,000 metric tons of acrylic acid, strengthens our position in the South American market for the acrylic acid value chain.
In Shanghai, China, we inaugurated our first polymerization plant for Ultramid® (polyamide 6 and 6/6,6) in Asia Pacific. With a capacity of 100,000 metric tons per year, this plant bolsters our position in the region, enabling us to better meet growing demand for polyamide products for engineering plastics and the fiber and foil industry.
We are continuing the optimization of our portfolio in the Oil & Gas segment. Wintershall is therefore divesting its assets in the four non-BASF-operated fields Knarr (20%), Veslefrikk (4.5%), Ivar Aasen (6.4615%) and Yme (10%) on the Norwegian continental shelf to Tellus Petroleum AS. At the same time, we are reducing our share in the BASF-operated Maria development by 15% to 35% and are gaining Tellus Petroleum as a further partner in the development of this field. The purchase price agreed upon amounts to $602 million. Depending on oil price developments in the period from 2016 to 2019, we can furthermore claim an additional payment of up to $100 million. The transaction is expected to close at the end of 2015 with retroactive ﬁnancial effect as of January 1, 2015.
In the future, we aim to focus our pharmaceutical ingredients and services business on pharmaceutical excipients, and are therefore divesting our custom synthesis business and parts of our active pharmaceutical ingredients (API) portfolio to Siegfried Holding AG. These include APIs such as ephedrine, pseudoephedrine and caffeine; selected APIs like ibuprofen, omega-3 fatty acids and polyethylene glycol will remain part of our portfolio. The transaction includes, for example, the divestiture of the production sites in Minden, Germany; Evionnaz, Switzerland; and Saint-Vulbas, France, and affects around 850 positions worldwide. It is expected to close in the fourth quarter of 2015.
BASF has signed a contract with Imerys S.A. for the sale of its global paper hydrous kaolin (PHK) business. The parties have agreed not to disclose the financial details of the transaction, which we expect to close in the third quarter of 2015. Imerys will acquire the PHK business, including a production site for kaolin processing in Wilkinson County, Georgia. A total of 190 positions will be affected globally.
Economic Environment, 1st Half 2015
- Global gross domestic product grows by about 2.5% and industrial production by around 2% compared with first half of 2014
- Positive development in eurozone but dampened growth in United States and China
Global gross domestic product grew by around 2.5% in the first half of 2015 compared with the same period of the previous year. Affected by a weak start to the year in the United States and China, worldwide industrial production only grew by around 2% in the same time frame. Regional developments varied widely: The economy in the eurozone was able to benefit from the lower price of oil and the weaker euro. In the United States, growth was negatively influenced by the harsh winter and by waning investment in the oil industry. Furthermore, the strong U.S. dollar weighed down export activity, and private consumption remained below expectations. China’s economy continued to grow, although more slowly than in the previous year. Residential construction in particular continued to decline, which had an adverse impact on construction-related sectors as well as the economy as a whole. Russia and Brazil, two important emerging markets, currently find themselves in a recession.