BASF, one of the world's biggest chemicals groups, yesterday added to the gloom shrouding the global economy when it issued its second profits warning in less than two months.
Its chairman, Jürgen Strube, said because of "current conditions of volatility" the German group would not be able to match last year's profits performance this time. He said that unless there was a "significant economic upturn" in the majority of the world's developed economies, by the end of the year at the latest, the group would miss its goal of increasing operating income by 10% a year between 2000 and the end of 2002.
BASF's insistence that it could still hit the target was greeted with some scepticism. "We think they are effectively abandoning that goal," said Dresdner Kleinwort Wasserstein analyst, Tony Cox.
In June the group announced it would not be able to deliver an improvement in operating income in the second quarter. Yesterday BASF said that even though all its operations were profitable, operating income in the second quarter (before special items) had fallen 14.9% to €751m (£466m). For the first half operating income was down 5.1% at €1.7bn.
Mr Strube said the group had been hit by the slowdown in Europe and Asia which was adding to the problems caused by the situation in the US which remained "difficult".
"At present we see few positive impulses from demand. Neither the manufacturing sector nor private consumption is providing additional economic stimulation. Significant increases in energy prices have had a serious impact. We are becoming increasingly concerned about the effects of lay-offs by companies around the world on consumer confidence and spending."
BASF has announced it is closing 10 sites and 14 manufacturing plants, including one at Birkenhead which will not reopen after being damaged by fire. It is cutting capital expenditure from €2.8bn a year to something over €2bn.
Yesterday Mr Strube said the group would also be increasing the number of job cuts over the next 18 months by 1,200 to 4,000 from a worldwide workforce of just over 100,000.
"Under the current condi tions of volatility we have to accept that the good full-year results we achieved in 2000 will not be reached this year."
Mr Strube argued BASF was better able to cope with economic downturns than it had been in the past. "Our results show that in the past 10 years BASF has become better at weathering the storms."
In Frankfurt BASF shares slipped 0.54% to €45.84.
