BASF warns on trading as interim results halve: Chemicals company to cut another 4,000 jobs

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The Independent Online
BASF, the German chemicals giant, underlined a 50 per cent decline in first-half profits yesterday by warning that trading conditions in the European chemicals industry were unlikely to improve significantly until 1995.

Taxable profits slumped from DM972m to DM483m ( pounds 197m), on a fall of almost 7 per cent in group turnover to DM20.8bn. The shares fell DM5 to DM251.50.

The tough trading conditions have forced the company to cut another 4,000 jobs next year, mostly in Germany. BASF has already slashed its workforce by about 5,700 to 121,100 in the past 12 months. By the end of this year it will have shed almost 20,000 jobs since 1989 through efficiency improvements and disposals.

The redundancies helped to cut fixed costs by more than DM350m in the first half and further cost savings of about DM1bn are envisaged over the next two years.

However, the company does not expect trading conditions to improve in the short term. Jurgen Strube, chairman, said: 'Incoming orders give no signals that the recession has come to an end. We do not expect any cyclical recovery of business in the second half of 1993. From 1994 onwards, slowly at first but at increased speed in 1995, we expect business to revive.'

The profits decline, which was worse than market expectations, stemmed from a deepening recession in Germany and other Continental European markets.

In addition the 15 per cent appreciation of the mark against other currencies and growing competition from Eastern European and Asian rivals put pressure on margins.

With the exception of oil and gas, all the group's operations suffered losses in sales and earnings during the first six months.

Sales volumes of plastics and fibres suffered from slack demand in the European processing industry. Agricultural products were hit by surplus capacity and a drop in consumption due to EC farming reforms.

BASF expects to finalise its plastics swap deal with Britain's Imperial Chemical Industries within the next few months.

Bayer, the German chemicals and healthcare group, experienced a one-fifth decline in taxable profits to DM1.4bn for the six months to 30 June. Its shares fell DM6 to DM290.50.