BASF agrochemical sales declined 2.7% in Q4

BASF’s agricultural solutions division sales declined 2.7% to €822 million in the fourth quarter of 2011. The decline was due to portfolio optimization measures and pre-buying by customers in the third quarter in South America. Regionally, sales in Europe were driven by positive year-end business in France. In North America, sales were up due to higher fungicide sales.

Earnings before interest, tax (EBIT) in the fourth quarter dropped by 7.1% to €39 million, almost matched the prior year’s level, despite an increase in R&D spending and selling costs.

Sales for the full year 2011 rose by 3.3% €4,165 million and EBIT was up 8.1% at €808 million. Volumes were up by 6% and prices were flat compared with the previous year.  This sales growth was primarily attributable to the positive market environment: the increased agricultural commodity prices and the resulting high liquidity in the agriculture sector, demand grew for innovative crop protection products. On the other hand, the depreciation of the U.S. dollar had a negative impact on sales.

In North America, sales declined by €34 million to €965 million, in particular due to the depreciation of the U.S. dollar. Furthermore, the cultivated area declined due to flooding during the first half of the year; herbicide demand decreased.

These developments could be partially offset by increased sales volumes of fungicides for plant health, as farmers were more willing to invest in products that offer benefits beyond disease control.

In Asia, sales improved considerably due to higher sales volumes, rising by €49 million to €487 million. This growth was particularly attributable to successful herbicide business in India as well as to strong demand for products based on F 500® in the growth markets of India and China. BASF pointed out they benefited from Samruddhi business model in India, which focuses on training farmers in the proper use of crop protection products and fertilizers in order to increase yields.

As a result of higher prices and growing volumes, sales in South America grew by €24 million to €1,054 million, despite negative currency effects. In particular, business with the AgCelence  production system – a combined product offering that ranges from seed treatment to foliar applications – grew considerably. Insecticides for sugarcane and seed treatment were in high demand, especially in Brazil.

Fungicide was the largest category of BASF’s sales in 2011, which accounted for 46% of total agrochemical sales. Herbicides accounted for 33% of total sales, and insecticides and others 21%.

BASF expects slight growth in the market for agricultural chemicals in 2012. They anticipate that prices for agricultural commodities will continue to be highly volatile and remain above the historical average. In addition to agricultural commodity prices and weather conditions, the exchange rates of important currencies will play an important role in the business development. In light of company’s recently launched products and the expansion of business in growth markets, BASF want to grow faster than the market in 2012.