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EARNINGS

Chemical giant BASF sees profits soar

BASF, the world's biggest chemicals company, presented stunning 2010 results on Thursday, bouncing back from a slump in 2009 and giving an upbeat outlook for the current year despite problems in Libya.

Chemical giant BASF sees profits soar
photo: DPA

BASF said its 2010 net profit leapt more than three-fold to €4.56 billion ($6.27 billion), though the year-earlier figure of €1.41 billion was in large part a reflection of the global economic slowdown.

Despite problems in North Africa, chairman Jürgen Hambrecht said in a statement that the company is now “optimistic for the first quarter (of 2011) and the year as a whole.”

He nonetheless acknowledged that “we are concerned about Libya,” where BASF’s Wintershall oil unit has halted production, leaving only a small group of core workers at its sites.

Meanwhile, the German group “achieved record sales and earnings in 2010,” Hambrecht said, with the former climbing by 26 percent to €63.9 billion.

Earnings before interest and tax (Ebit) and special items leapt by 68 percent to €8.1 billion, the statement added, as BASF continued its integration of the specialty chemicals group Ciba.

It also finalized the purchase of Cognis, another small chemicals firm focused on health and nutrition products.

The fourth quarter of last year was especially strong for BASF, with net profit soaring to €1.1 billion from €455 million in the same period of 2009, outstripping an average analyst forecast of €891 million compiled by Dow Jones Newswires.

Rivals like Dow Chemical, DuPont and Air Liquide have also posted robust results and issued upbeat forecasts based on the assumption that global economic conditions will not deteriorate this year.

Like others, the German group is focused on Asia, and aims “to significantly exceed the record levels for sales in income from operations achieved in 2010,” the statement said.

BASF plans to expand a site in Nanjing, China, and build a new specialty chemicals plant in Malaysia.

AFP/kdj

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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