April 27, 2012 / 5:51 AM / 7 years ago

UPDATE 3-BASF oil & gas offsets plastics weakness

* Q1 adjusted EBIT 2.53 bln euros, vs forecast 2.32 bln

* Profit at Oil & Gas beats view, rest of business disappoints

* Sees earnings decline in H1, growth in H2 and year

* Finance chief says prices must rise

* Shares down 1.8 percent (Adds CFO comment, details on prices, oil&gas unit)

MANNHEIM, Germany, April 27 (Reuters) - BASF reported growing profit from its oil and gas unit as production ramped up in Libya, helping to offset the lower volumes and high raw material prices that weighed on its legacy chemicals and plastics businesses.

The world’s largest chemicals maker by sales said first-quarter earnings before interest and tax (EBIT) adjusted for one-off items declined less than expected, easing 7.3 percent to 2.53 billion euros ($3.35 billion) compared with a consensus forecast of 2.32 billion.

BASF, whose products range from catalytic converters and car coatings to insulation foams, said on Friday it still saw sales and operating earnings rising this year as growth would kick in during the second half of the year following year-on-year declines in the first half.

Quarterly adjusted EBIT from oil and gas trading of 1.16 billion euros beat estimates by almost half, but lower sales volumes of engineering plastics in the key Asia-Pacific region and higher raw material prices weighed on its chemicals and plastics units.

While oil above $100 per barrel and uncertainty about the global economy is a toxic mix for most chemical makers, BASF’s self-styled “natural hedging” in the form of its fossil fuel business provides a counterbalance.

But oil is also the basic feedstock for almost all chemicals and plastics.

In the first quarter, crude oil traded about 10 percent higher on average than a year earlier, while BASF chemicals and plastics price mark-ups were only 5 percent on average.

“We absolutely have to go for further price increases,” finance chief Hans-Ulrich Engel said during a conference call.

BASF shares were down 1.4 percent at 64.08 euros by 0931 GMT compared with a 0.4 percent rise in the European blue-chip index .

BASF’s comments come after quarterly sales at Dow Chemical , the largest U.S. chemicals maker, came in below forecasts.

Dutch group AkzoNobel, the world’s largest paints maker, said economic uncertainty, even in some emerging markets, as well as high raw materials prices posed challenges this year.

Agricultural pesticides have proved a rare bright spot for the industry, due to unusually favourable weather for farming, supporting not only BASF but also crop chemical peers Dow, DuPont and German group Bayer. ($1 = 0.7559 euro) (Reporting by Ludwig Burger; Editing by David Cowell)

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