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According to Dr. Strube, Chairman, Board of Executive Directors, the business environment has become considerably more difficult than it was a year ago. The BASF group sales decline results from a combination of lower selling prices. Negative currency effects and an overall decline in volume. Divestitures of selected operations affected the downtrend, however, adjusting for this effect, sales would still be lower by about 2 per cent than in the first three months last year.

A significant change in current business conditions is presently not evident. BASF was still able to increase its volume of business in Germany and western Europe in the first quarter. This gain is reflected in the performance of BASF Aktiengesellschaft which, compared to the first quarter in 1990, fared better than the BASF group. BASF AG's pretax earnings fell short of the 1990 first-quarter by only 2.7 per cent. However, the lower level of business in North America and the ongoing economic difficulties in some Latin American countries could not be offset.

Lights and Shadows

BASF's operational sectors developed unevenly during the first quarter. The raw materials and energy sector continued to gain also in March. A trend that is expected to be maintained in coming months. Among the Agricultural chemicals, fertilizers and the Kali Und Salz operations strengthened their positions. The difficult situation of the crop protection business in the United States and unstable market conditions in France are major factors that make any prediction about sales and earnings difficult.

Sales of plastics in the first quarter were higher than in the corresponding year-ago period. Earnings will depend on the extent of our success in stabilising prices in coming months. Demand for chemicals continued to be brisk, except in North America. The development of earnings did not match the improvement in business. Gratifying gains in sales by the consumer products sector were achieved by information systems and pharmaceuticals.

Dr. Strube emphasized that BASF will not let up in its efforts to improve earnings, particularly in the face of unfavourable and uneven economic conditions outside Germany. Appropriate measures, particularly in reducing fixed costs, have already been launched. Moreover, BASF will continue to concentrate on strategically important operating sectors as much as on strengthening its international competitiveness.

Solidity and Liquidity

BASF's Chief Financial Officer, Max Dietrich Kley, pointed out that BASF, based on its "excellent financial structure" will continue to grow on the strength of its own resources. With its equity ratio at about 40 per cent and its liquid funds at nearly DM 6 billion BASF meets the criteria of solidity and liquidity.

BASF's Board of Executive Directors and Supervisory Board therefore are proposing the payout of a dividend per share for fiscal 1990 in the amount paid in the preceding year, namely DM 13. It is an important prerequisite for the better valuation of the BASF share. The net liquidity of BASF, thus cash and cash items less liabilities to banks and the capital market, totalled DM 2.6 billion. In 1990 the cash flow again amounted to DM 5 billion and therefore declined despite lower net income by only 9 per cent as a result of high depreciation. In the view of Mr. Kley BASF is therefore financially well prepared for the future.

[Tabular Data Omitted]
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Title Annotation:Pakistan; Industry
Publication:Economic Review
Article Type:company profile
Date:Jun 1, 1991
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