BASF plans plant with Algerian firm

The German chemicals and pharmaceuticals giant BASF has signed a deal with Sonatrach, the Algerian oil and gas company, to build a propylene plant next to its existing joint venture with Hoechst at Tarragona in Spain. But in London yesterday Mr Juergen Strube, the BASF chairman, ruled out a tie-up with Dow Chemicals, the world's leading polystyrene producer, due to anti-trust problems.

BASF has also decided against taking an equity stake in Gazprom, the Russian gas company, saying it would not enhance the joint marketing venture between the two companies.

BASF reported a 14.5 per cent rise in sales to 27.8bn German marks (pounds 9.5bn) and a 5.8 per cent increase in pre-tax profits to DM2.458bn in the six months to the end of June, in line with analysts' expectations. Earnings grew more rapidly in the second quarter than the first and the group expects to increase profits and exceed sales of DM50bn for the full year.

Profit margins in the first half were hit by the strength of the dollar, in which most of the group's raw materials are priced, according to Mr Strube. Profit contributions from oil and gas, colorants and finishing products were sharply higher, but plastics and fibres showed lower profits. Knoll, the loss-making pharmaceuticals division, has been hard hit by heavy research and development costs and an immediate return to profit is unlikely.