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Combined Regional Sales

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Total Agricultural Solutions sales declined (6%) for the quarter with a mix of contributions, mainly by volume +5%, prices (8%) and currency (3%). For the first 9 months of 2017, growth of 1.7% was driven by volume +6%, price (2.4%) and currency (1.9%). Growth was led by Europe +6.3% and Asia-Pacific +7.2% during the quarter with higher sales of proprietary herbicides and fungicides. Growth during the 9-month period was driven by Asia-Pacific +7%, North America +6.1% and Europe 2%.

BASF is strategically adding to its insecticides portfolio with the registration of afidopyropen (Inscalis™) jointly with Meiji Seika Kaisha in Japan. There is also the addition of Bayer’s seeds, traits and herbicides technology to their portfolio in 2018. The outlook for the year end 2017 remains positive as crop conditions in cereals and oilseeds are expected to trigger off higher planting in most regions, especially Europe and North America. The Latin America and Asia-Pacific regions are also expected to perform well in Q4 to finish the year on a positive note.

BASF is geared to grow in the premium herbicide and fungicide sector as their products have shown excellent proven results in the field. Functional care solutions should improve with increased maize, soybean, cotton and sugar-cane planting in Latin America, Australia and parts of Africa during H2 2017. Strengthening of distribution is needed in other countries as shown by their revived direct distribution in Australia-New Zealand.

Divisional Operating Profits

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Operating profits (EBIT) for Q3 2017 declined severely (78.4%) due to sales reversals in Brazil, lower margins from lower selling prices, lower-priced product mixes, as well as higher plant costs where investment in new manufacturing activities has grown. In addition to this, plant shut-downs during the two hurricanes, affected production in Texas and Puerto Rico during the latter part of Q3.Their cost reduction program was not enough to offset the decline from the low prices. This is expected to level out during the year.

Depreciation and amortisation increased 12.1% in Q3 and declined (1.5%) during the 9-month period of 2017, with a corresponding decline of EBITDA of (43.7%) in Q3 and (13%) during the first 3 quarters of 2017.

Research & Development

Crop protection chemical R&D expenses increased by 5.3% during Q3 and 4.1% during the 9-month period of 2017. Investment in this area will grow as they continue development of the new aphicide licensed from Meiji Seika.

For their Seeds and Traits segment however, spending in biotechnology/seed production is expected to increase sharply with the potential acquisition of Bayer’s seeds, traits and related herbicides business as described above. Plant biotechnology investments with Monsanto continue to sustain development in this sector.

Last year BASF closed one of its research units in Europe, shifting to newer locations in China and elsewhere. The company has invested further in its research and manufacturing base in India at Dahej in Gujarat, Plant Sciences at Pune in Maharashtra. Their research centre in Shanghai is already operational and will be shared between all segments. BASF has openly declared a preference to investing in the Americas and Asia-Pacific due to delays and political issues in Europe.

Clearfield technology with imidazolinone-tolerant seed varieties is already showing success in Asian countries as it has done in North America. The issue of insecticidal seed treatment bans by the EU authorities is also likely to influence future investment as well as product support and defence costs for the major EU players like BASF and Bayer, with Asia-Pacific countries becoming the next big markets.