German chemical BASF hit by China weakness

A weaker Chinese economy weighed heavily on profits at BASF, the world's biggest chemicals maker, the German firm said on Thursday, as it reported a steep drop in second-quarter net profits. BASF said net profits came to 1.23 billion euros ($1.49 billion) in the second three months of the year, a decline of 15 percent on the same period in 2011. Operating profit was flat at 2.2 billion euros, below the expectations of analysts surveyed by Dow Jones Newswires who had forecast a seven-percent rise to 2.4 percent. Turnover in the second quarter, however, rose by a better-than-expected five percent to 19.5 billion euros. "The Chinese growth engine has started to stall, leading to a decrease in BASF's sales in local-currency terms in Asia in the second quarter, as they also did in the first quarter of 2012," the firm explained in a statement. Chief Executive Kurt Bock said: "Our customers are continuing to act cautiously and are reducing their inventories, also in expectation of falling prices due to declining raw material costs." Nevertheless, the group confirmed its aim to increase sales and earnings compared with the second half of 2011. Looking at the firm's order books has "led BASF to become more cautious about its expectations for the global economy in 2012 than originally expected at the beginning of the year," the group said. The markets gave the thumbs-down to the results, trading BASF stock down 1.0 percent in early exchanges on the main German DAX market, which was down 0.4 percent overall. BASF employs more than 111,000 people worldwide.