German petrochemicals companies have so far managed to hold up in the face of economic slowdown and rising raw materials costs. However, BMI's latest Germany Petrochemicals Report envisages more difficult times ahead owing to the effect of decline in construction activity worldwide, lower rates of economic growth in both the domestic and export markets, and increased competition from Asian and Middle Eastern producers as a result of an expansion in capacity and the appreciation of the Euro. BMI's long-term output forecasts project average annual growth of 3% up to 2020, assisted by exports to growing markets in Central and Eastern €ope; in 2007, exports to the region exceeded €16bln and accounted for 12% of Germany's chemical exports.
German petrochemicals companies reported mixed results in Q2-08. Although BASF reported Q2-08 net income up 27% y-o-y, to €1.3 bln, on sales up 11% y-o-y to €16.bln, its chemicals business reported operating income down 34%, to €378mn, despite an 18% rise in sales, owing to lower margins in the petrochemicals products unit and scheduled maintenance shutdowns. Its plastics business's income also fell 14%, to €291mn, on sales up 4% to €2.7 bln, owing to poor performance in North America.
Meanwhile, Lanxess reported net profits of €53 mln in Q208, compared to a net loss of €59 mln in Q2-07, on the back of a 2.2% y-o-y rise in sales to €1.76 bln. The positive results were related to the firm's strategy of pass on raw material cost increases to product prices. However, growth was largely achieved in emerging markets, while sales in Germany fell 9.3% y-o-y to €381 mln, although they were up by a marginal 0.6% on an adjusted basis. Germany's share of Lanxess sales fell to 21.6% in Q2-08, compared with 24.3% in Q207. Lanxess is targeting EBITDA pre-exceptionals of over €700 mln in 2008, compared with €719 mln in 2007, which includes €20 mln in earnings from Lustran Polymer prior to its sell-off in September 2007. BASF is planning to divest its styrenics and copolymers operations as a single global unit. In the run-up to the sale, BASF is combining its styrenics operations into stand-alone subsidiaries to be launched in January 2009. Copolymers were added to the divestment package in August 2008. The enlarged divestment package has a combined capacity of 3.6 mln tpa, including 1.37 mln tpa of styrene monomer; 1.38 mln tpa of polystyrene (PS); 110,000 tpa of Styroflex styrene butadiene copolymers and 760,000 tpa of acrylonitrile butadiene styrene (ABS) and acrylonitrile styrene acrylate (ASA) copolymers. Meanwhile, BASF has refused to respond to claims that it is considering acquisitions, including industrial gases and engineering group Linde, a move that would provide considerable synergies.
In terms of BMI's method of risk scoring in the petrochemicals sector, Germany scores 80.4 points putting it in second place in our Global Petrochemicals Rankings, 4.5 points ahead of China and 9.1 points behind the US. BMI believes that Germany will be overtaken by China in the next one to two years owing to the rapid increase in Chinese petrochemicals capacity