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To: richardred who wrote (17529)	8/7/2003 1:01:47 PM
From: richardred	Respond to of 78742

Wellman not alone-BASF- Some Foreign chemicals having a hard time to. LUDWIGSHAFEN, Germany (Dow Jones)--BASF AG (BF) reported sharply lower second- quarter net profit Thursday due to high corporate taxes, and sales fell on negative currency effects. But cost containment efforts by the German chemical company led to a gain in operating profit before exceptional items, beating consensus forecasts. The company was guarded about business developments for the rest of the year, however, saying "major efforts" would be needed to match 2002 sales and earnings in 2003. The comment was interpreted by some analysts as a profit warning. It expects risks associated with volatile oil prices, the uncertain development of the U.S. dollar and persistent stagnation in important economies to stand in its way, and said it doesn't expect a general economic upturn until the fourth quarter at the earliest. For the third quarter, it expects sales to be flat year-on-year and said earnings before interest and tax before special items would likely fall. ABN Amro analysts took BASF's outlook as a profit warning, but said its second-quarter results were decent under the present industry circumstances. Bernd Schnarr, chemicals analyst at WGZ Bank in Duesseldorf, Germany, didn't see it quite the same way. "It's not a profit warning, but it's very bleak," he said. Schnarr isn't planning to change his accumulate rating on the stock, but said he will likely reduce his full-year earnings estimates. BASF shares fell sharply on the data and on overall negative sentiment for the sector following weaker-than-expected earnings data from its rival Bayer AG ( BAY) on Wednesday. At 1050 GMT, BASF shares were trading down 5%, or EUR2.05, at EUR39.25. Bayer shares continued their decline Thursday, trading down 3.6%, or 72 cents, at EUR19.15, after falling to EUR19.90 from EUR21.28 on Wednesday. BASF's second-quarter sales slipped 1.6% to EUR8.25 billion, short of consensus expectations for a slight rise. Forecasts ranged between EUR8.04 billion and EUR8.65 billion in a Dow Jones survey of six analysts prior to the data. Operating profit before special items inched up 1.2% to EUR832 million, slightly ahead of expectations for EUR832 million. Forecasts ranged between EUR796 million and EUR870 million. Operating profit after one-time items fell to EUR744 million from EUR817 million, hit by EUR58 million charges to restructure operations in the North American Free Trade Area and to integrate a recent acquisition at its agricultural chemicals division. Net profit slid to EUR195 million from EUR502 million, burdened by a one-time corporate income tax expense of EUR124 million, which BASF said it's appealing. The charge is related to a change in German tax law regarding corporate income tax credit on dividends, BASF said. Sales volumes and selling prices rose by 3.2% and 3%, respectively, in the second quarter, but a sharp rise in the euro against the U.S. dollar wiped 8.9% off overall sales. Chairman of the company's Executive Board, Juergen Hambrecht, said the company wasn't pleased with the performance from its North American business in the second quarter. BASF's sales in the North American Free Trade Area fell 13% year-on-year to EUR1.98 billion in the second quarter, and operating profit before special items slid 33% to EUR52 million from EUR77 million. "We are not and cannot be satisfied with this," Hambrecht said. The company has decided to step up restructuring efforts to boost earnings, and said it expects to book an additional $14 million charge in the second half of the year. Hambrecht declined to talk about possible site closures, saying he would provide further detail on the subject in the latter half of the year, but executive board member Klaus Peter Loebbe said the company expects to cut around 1,000 jobs in the NAFTA region by the end of the year. While mega-mergers or major acquisitions are not part of its immediate growth strategy, Hambrecht said the company plans to significantly increase cash flow this year to help finance targeted acquisitions, partnerships and regional expansion. The company plans to raise its investment spending this year, but Chief Financial Officer Kurt Bock said it will exercise "strict capital discipline" in its expansion strategy. The company also plans to continue its share buyback program next year. By the end of the first half of 2003, it had spent EUR226 million on repurchasing 6.9 million of its own shares, and repeated its goal to spend a total EUR500 million on share repurchases this year. Company Web site: basf.de