* Chemicals business profit likely to fall
* Resumption of oil production in Libya to drive 2012 profit
* Says Chinese growth engine has started to stall
* Q2 adj EBIT 2.5 bln euros vs 2.3 bln euro forecast
(Adds CEO and analyst quite, share price)
FRANKFURT, July 26 BASF stuck to its
outlook of higher operating earnings this year, predicting that
the resumption of its oil production in Libya would help to
offset a likely decline in profit at its core chemicals
The world's largest chemicals maker by sales, whose products
range from catalytic converters and car coatings to insulation
foams, said it was suffering as a result of a slowdown in China,
its main growth market, and a slight decline in sales and
volumes in debt-laden Europe.
"Our forecast is especially supported by the resumption of
our crude oil production in Libya. It is unlikely that the
earnings from our chemicals business will match the level of the
previous year," Chief Executive Kurt Bock told Reuters.
"The uncertainties have increased quite dramatically over
the last couple of months," Bock told Reuters Insider TV, adding
the biggest surprise has been the weakness in the Chinese
In response, the company is slowing hiring in China and has
cut inventory levels to shore up cash flow. It is also speeding
up cost-cutting across the group, but will continue to invest in
Asia as planned because long-term growth projections remain
intact, Bock said.
Asia, which accounted for almost 20 percent of BASF sales
last year, has proved a headache for other global players.
Brazil's Vale, the world's largest producer of
iron ore, on Wednesday cited China's economic slowdown as
second-quarter profit tumbled. Engineering conglomerate Siemens
on Thursday said major orders from China were
BASF shares were 1.2 percent lower at 55.49 euros at 0925
GMT, underperforming the STOXX Europe 600 Chemicals Index's
0.2 percent decline.
"We remain cautious due to industry sentiment remaining
negative and volatile, and the resulting expectation of cautious
management guidance for the back half of the year," Bernstein
Research analysts said in a note to investors.
Before last year's armed conflict in Libya, BASF's oil and
gas unit was the second-largest foreign oil company in the North
African country after Italy's ENI.
After some setbacks in ramping up production there in the
first quarter, BASF managed to continuously produce crude oil in
Libya throughout the second quarter, it said.
Output is now at 80,000 barrels per day, and only
bottlenecks in the country's pipeline infrastructure are keeping
BASF from churning out its maximum capacity of 100,000 barrels.
The group also said it still expected group sales to rise
this year even as sales volumes in most of its chemicals and
plastics businesses declined in the second quarter.
BASF's earnings before interest and tax (EBIT), adjusted for
one-off items, rose by more than 11 percent to 2.5 billion euros
($3.03 billion), surpassing the 2.3 billion euro average
estimate in a Reuters poll of analysts.
U.S. peer DuPont said this week it expected 2012
earnings to come in at the bottom of its prior forecast range,
due in part to economic uncertainty around the globe.
($1 = 0.8248 euros)
(Reporting by Ludwig Burger; Editing by Erica Billingham)