UPDATE 2-BASF profit misses forecast as strong euro bites

Thu Jul 24, 2014 7:24am EDT

* Q2 adj EBIT 2.05 bln eur vs 2.12 bln poll avg

* BASF still sees slightly higher adj EBIT in 2014

* Says economic environment more challenging (Adds details and background on forex effect, CEO comment)

By Ludwig Burger

FRANKFURT, July 24 (Reuters) - BASF, the world's largest chemicals maker by sales, became the latest euro zone company to suffer from the strength of the euro, posting lower-than-expected earnings growth even as sales volumes rose.

Second-quarter earnings before interest and tax (EBIT), adjusted for one-off items, rose 12.1 percent to 2.05 billion euros ($2.76 billion), just short of the 2.12 billion euro average estimate in a Reuters poll of analysts.

"The devaluation of almost all major currencies against the euro negatively impacted earnings by roughly 200 million euros compared to the previous second quarter," Chief Executive Kurt Bock said on Wednesday.

"We expect something similar going forward so it's a real drag on our performance," he told Reuters Insider TV an in interview.

Sales and net income also narrowly missed consensus estimates, hurt also by an outage due to an accident at a Dutch plastics raw materials plant, run jointly with Shell, and by sluggish raw materials trading.

BASF shares were down 1.5 percent at 1100 GMT, compared with a 0.5 percent rise in Germany's blue-chip index.

The strong euro, up more than 5 percent against the U.S. dollar on average over the quarter, has proved a burden for a range of European companies.

German aircraft engine maker MTU Aero Engines blamed currency effects when it cut its sales target last week, while Frankfurt airport's operator has said the strong euro was putting deep-pocketed overseas travellers off shopping.

BASF said it was hurt by the weakness of the U.S. dollar , Japanese yen and Brazilian real in particular.

Earnings at the German group's core chemicals and plastics businesses as well as at its oil and gas unit rose faster than analysts had expected, helped by higher sales of petrochemicals in North America and increased offshore oil production in Libya.

DZ Bank analyst Peter Spengler said the negative currency effects masked an otherwise good operating performance.

"The quality of the results is good, since chemical businesses were strong," he said, keeping a "buy" rating on BASF shares.

The German group said that despite unfavourable currency developments, it continued to target a slight increase in adjusted EBIT in 2014 but warned the economic environment had become more challenging.

BASF reiterated it aimed to increase sales volumes excluding the effects of acquisitions and asset sales but that revenues would decline slightly due to the divestment of its gas trading and storage business.

($1 = 0.7431 Euros) (Additional reporting by Angeline Ong in London and Frank Siebelt in Frankfurt; Editing by Maria Sheahan and Mark Potter)

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