For 2016, we anticipate a continuation of the currently challenging conditions along with substantial risks. The global economy is expected to grow at a level approximating that of 2015. We confirm our outlook for the full year: We aim to increase 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.
Opportunities and Risks
- Signiﬁcant risks and opportunities arise from overall economic developments and volatility in exchange rates and margins
We expect the global economy in 2016 to continue growing at the same pace as the previous year. We continue to see signiﬁcant risks in a considerable slowdown of the Chinese economy. Such a development would negatively impact demand for intermediate goods and investment goods, and affect emerging markets that export raw materials as well as the advanced economies. Any escalation of geopolitical conﬂicts also poses risks to the global economy. Important opportunities and risks for our earnings are also associated with uncertainty regarding growth in Europe, the development of key customer industries, and volatility in foreign currency exchange rates and margins.
The other statements on opportunities and risks made in the BASF Report 2015 remain valid, as well.
- Considerable sales decline due to divestiture of gas trading and storage business
- Income from operations before special items expected at level slightly below 2015
Our expectations for the global economic environment in 2016 remain unchanged:
- Growth of gross domestic product: 2.3%
- Growth in global industrial production: 2.0%
- Growth in chemical production: 3.4%
- An average euro/dollar exchange rate of $1.10 per euro
- An average Brent blend oil price for the year of $40 per barrel
BASF Group sales will decrease considerably in 2016. As a consequence of the asset swap with Gazprom, the Oil & Gas segment is no longer receiving contributions from the natural gas trading and storage business in particular. In the ﬁrst three quarters of 2015, these activities had 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 expected to shrink significantly 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.
1 Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.