Chinese prices hurting BASF sales, margins

Despite an increase in demand for fat-soluble vitamins, organic acids and aroma chemicals boosting sales by 5 per cent, turnover fell 3 per cent during the third quarter because of low market prices of the unit's two biggest volume products - lysine and vitamin C.

Sales at the German group's fine chemicals division have now dropped 8 per cent for this year's nine months compared with the prior year to reach €2,578 million.

In the third quarter, prices accounted for a 7 per cent change in sales, on a par with this year's second quarter. At that time, market prices for lysine were around €1.20 per kg, half of that being charged last year.

In vitamin C, market prices - shaped by four leading Chinese players - are said to have stabilised this year but remain low at around €3 per kg. This has forced European manufacturers - BASF and DSM - to look at further restructuring measures to continue their activities in this area.

DSM has closed one of its production facilities, leaving it with reduced yet more efficient capacity. BASF reported a €26 million charge for the restructuring of its vitamin C operations in August but has revealed no detail on how this charge will be used.

The fine chemical unit's earnings were also affected by a further increase in raw material costs, said the group yesterday.

Earnings before interest and tax fell to €1 million from €3 million in the prior year's third quarter. Earnings before special items in per cent of sales fell to 0.2 from 3.4 last year.