Lysine, vitamin prices wipe out profits at BASF fine chemicals

Related tags Vitamin

Plummeting prices for the animal feed ingredient lysine and the
costs of restructuring pressurized vitamin C production virtually
eliminated profits at BASF's fine chemicals division this year,
reports Dominique Patton.

The group, which otherwise reported a strong increase in sales and profits for the second quarter after passing on high raw material prices for crude oil to its chemicals customers, saw fine chemicals income fall to €1 million for the first half compared with €79 million during the same period of 2004.

It blamed a "drastic fall" in lysine prices, the division's biggest volume product, for a 7 per cent drop in sales during the second quarter.

Fine chemicals spokesman Alois Kindler said lysine prices had halved between this quarter and last year's second quarter to reach around €1.20 per kg.

An added currency effect eroded any benefit from higher sales of fat-soluble vitamins to animal nutrition customers, thanks to higher prices gained by BASF on vitamin A and E.

"Earnings fell primarily due to the decline in the margin for lysine,"​ said the company in a statement. "Earnings…remained unsatisfactory."

Income from second quarter operations (€7 million) was further hit by a €26 million restructuring charge for vitamin C. BASF, like the only other remaining vitamin C maker in Europe, DSM, is feeling the heat from Chinese competitors.

Chinese vitamin C was selling for as little as €2.80 per kg in May this year, almost its lowest point.

Kindler said the firm was currently "considering options" for vitamin C, its second biggest volume product, and declined to reveal further information on what the restructuring will involve.

BASF​ has already responded to market pressures by streamlining its Ludwigshafen plant, expected to reduce costs by €480 million per year.

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