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Thursday, 21 June, 2001, 16:12 GMT 17:12 UK
BASF shuts plants
BASF ethyl benzene and styrene plant in Antwerp, Belgium
BASF: 'High raw material prices, no sign of US upturn'
BASF, the European chemicals and petrochemicals giant, is to shut 10 plants and slash spending because of world economic slowdown.

The German company said it was also closing a further 14 units at other sites to reduce capacity, adding that it no longer expected to achieve any increase in operating profit in the second quarter.

BASF, which employed 103,000 people worldwide at the end of 2000 and has annual sales of about 36bn euros ($31bn; 22bn), declined to say which plants it would close or how many jobs would be lost.

Analysts have speculated that some cuts will come in the UK where BASF has 24 sites, including pharmaceuticals plants in Nottingham and Cramlington, Northumberland, a superabsorbents unit in Birkenhead and a plastics factory in Middlesbrough.

Industry sources have said the Birkenhead facility in particular is under threat of closure.

'Substantially slower'

Under the cost-cutting plans, the company is to reduce capital spending by one fifth, with the aim of meeting an earlier target to increase operating profit by an average of more than 10% for the years 2000 to 2002.

Chief executive Juergen Strube said: "With these measures, we are adapting our business to the substantially slower economic growth worldwide.

"In light of continuing high raw material prices, weaker signs of growth in Europe, and no indication of an economic upturn in the United States, BASF is not expecting an increase in income from operations in the second quarter."

A spokesman said the company would first need to inform staff before making details of the job and cost cuts programme public.

ICI hit

BASF shares spent much of the day's trade in Frankfurt more than 5% down but had recovered to 43.7 euros in late trading to be 2% lower on the day.

One analyst said German chemical companies had been particularly guilty of overestimating their ability to weather economic downturn.

He said statements made during the first quarter had been based on assumptions that the US economy would pick up in the second half of the year and that the European economy would remain resilient.

Those assumptions were no longer true, he said.

BASF's profit warning also dragged shares in rival chemicals firms lower, with UK group ICI closing 19p, or 4.3%, down at 422p.

But analysts played down the significance of BASF's announcement for the UK rival.

"It always happens when BASF says something adverse that ICI gets hit, but these days they don't have much in common," said Peter Cartwright, analyst at Williams de Broe stockbrokers.

ICI now focuses on specialist chemicals - whereas BASF's business is more broadly based - and last month said it was competing well amid the US slowdown.

See also:

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