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EARNINGS

Chemical giant BASF sees profits soar

BASF, the world's biggest chemicals company, presented stunning 2010 results on Thursday, bouncing back from a slump in 2009 and giving an upbeat outlook for the current year despite problems in Libya.

Chemical giant BASF sees profits soar
photo: DPA

BASF said its 2010 net profit leapt more than three-fold to €4.56 billion ($6.27 billion), though the year-earlier figure of €1.41 billion was in large part a reflection of the global economic slowdown.

Despite problems in North Africa, chairman Jürgen Hambrecht said in a statement that the company is now “optimistic for the first quarter (of 2011) and the year as a whole.”

He nonetheless acknowledged that “we are concerned about Libya,” where BASF’s Wintershall oil unit has halted production, leaving only a small group of core workers at its sites.

Meanwhile, the German group “achieved record sales and earnings in 2010,” Hambrecht said, with the former climbing by 26 percent to €63.9 billion.

Earnings before interest and tax (Ebit) and special items leapt by 68 percent to €8.1 billion, the statement added, as BASF continued its integration of the specialty chemicals group Ciba.

It also finalized the purchase of Cognis, another small chemicals firm focused on health and nutrition products.

The fourth quarter of last year was especially strong for BASF, with net profit soaring to €1.1 billion from €455 million in the same period of 2009, outstripping an average analyst forecast of €891 million compiled by Dow Jones Newswires.

Rivals like Dow Chemical, DuPont and Air Liquide have also posted robust results and issued upbeat forecasts based on the assumption that global economic conditions will not deteriorate this year.

Like others, the German group is focused on Asia, and aims “to significantly exceed the record levels for sales in income from operations achieved in 2010,” the statement said.

BASF plans to expand a site in Nanjing, China, and build a new specialty chemicals plant in Malaysia.

AFP/kdj

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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