By Ludwig Burger and Patricia Weiss
FRANKFURT (Reuters) - German chemicals giant BASF on Friday cut its budget for investment in plants and equipment this year to preserve cash amid a global downturn in the business cycle.
"We have to exercise strict discipline," when it comes to investments and reducing inventory levels of raw materials, Chief Financial Officer (CFO) Dirk Elvermann said in a media call after the release of detailed second-quarter results.
Investments this year would be cut to 5.7 billion euros ($6.24 billion), down from 6.3 billion projected earlier this year.
Among other measures, some spending on one of the company's main projects, the construction of a chemical complex in Zhanjiang, southern China, would be postponed and better financial terms were also renegotiated with local contractors, the CFO added.
The company, however, confirmed the larger plans for the site and the 10 billion euros earmarked for it overall.
BASF on Friday also said that the decline in second-quarter earnings was a result of lower prices and lower volume across its businesses but added that its agriculture division was able to increase prices.
Earlier this month, it reported a drop in quarterly earnings in an unscheduled release and cut its full-year profit guidance, the latest in a string of chemical companies caught out by weak demand from industrial clients and higher interest rates.
A slew of chemical industry peers including Croda, Lanxess, Victrex (LON:VCTX), Clariant and Evonik have recently cut their earnings predictions.
Bayer (ETR:BAYGN), which competes with BASF in seeds and crop chemicals, this week also slashed its outlook on weak demand and as rivals making glyphosate-based weedkillers returned to the market.
BASF also voiced frustration about the lack of building permits for a piece of its second major expansion project, building a global auto battery chemical materials production network.
The company is in protracted talks with local regulators about getting a 350 million-euro cobalt and nickel refinery in Finland on stream. The site is projected to provide feedstock for a cathode materials plant in eastern Germany.
"On this, it will depend what happens to the (Finish) plant, we don't know the result of (the talks) yet," said CEO Martin Brudermueller, adding that additional spending may be needed.
($1 = 0.9131 euros)