BASF SE’s second-quarter profit dropped 16 percent as the world’s largest chemical maker was hit by weaker demand for farm products and a lower oil price.
Earnings before interest, taxes and one-time items fell to 1.71 billion euros ($1.88 billion) in the three months through June, the Ludwigshafen, Germany-based company said Wednesday in a statement. Profit fell 12 percent at the division that makes fungicides and herbicides used on crops.
“Agricultural solutions came out worse than expected,” Bernstein analyst Jeremy Redenius wrote in a note. “Declines in Europe and Latin America more than offset the growth in Asia and North America.”
Chief Executive Officer Kurt Bock has focused on cutting costs instead of taking part in consolidation in the agricultural sector as rivals Dow Chemical Co. and DuPont Co. work toward merging their crop chemical activities amid declining farm incomes. BASF reiterated that profit and sales will fall this year as a lower crude price hurts oil-and-gas unit Wintershall and after the company divested its gas-trading business.
The shares fell 3 percent to 69.85 euros at 9:09 a.m. in Frankfurt, giving the Germany company a market value to 64 billion euros.
“Our outlook for 2016 remains ambitious in the current volatile and challenging environment and is particularly dependent on further oil price development,” Bock said in the statement. “We remain focused on cost-containment and restructuring measures.”
Even as oil prices rebounded in the second quarter to average $47.03 a barrel for the Brent benchmark, up from a 12-year low of $27.10 in January, crude’s recovery has showed signs of fading over the past weeks as huge stockpiles remain. The International Energy Agency said earlier this month that “the road ahead is far from smooth.”
BASF’s quarterly sales dropped 24 percent to 14.48 billion euros, missing an analyst estimate for 15.2 billion euros. BASF gave up 12 billion euros in sales to Gazprom PJSC in an asset swap last year.
Profit was boosted by the company’s specialty chemicals businesses, which make ingredients for cosmetics, household products and pharmaceuticals. After years of restructuring and job cuts, earnings at the performance products division jumped 65 percent.
Bock agreed to his first multi-billion-dollar acquisition during the quarter with the $3.2 billion purchase of Albemarle Corp.’s coatings business to expand the company’s anti-corrosion treatments for metal car and plane parts.