BASF to close sites

June 21, 2001 Posted: 1040 GMT

LONDON (CNN) -- German chemicals company BASF announced it is to close down factories as the world economy slows down.

BASF, Europe's biggest chemicals company, issued a profit warning on Thursday, and said it plans to shut down 10 sites and an additional 14 plants in other areas to cut capacity.

BASF, which employs 103,000 people worldwide, declined to comment on the number of job losses expected from the closure programme.

It blamed the factory closures and profit warning on "continuing high raw material prices, weaker signs of growth in Europe, and no indication of an economic upturn in the United States."

The company plans to cut its capital expenditure programme by a fifth and expects cost savings of about 400 million ($340 million) worldwide from plans to restructure the business.

It had forecast a significant rise in second quarter profit, but reversed its outlook on Thursday, saying it is "not expecting an increase in income from operations in the second quarter."

The company declined to comment on how many jobs were likely to go, which plants it intended to shut and the cost savings it is aiming for.

BASF's statement came after German chipmaker Infineon (FIFX) issued a profit warning the day before, which predicted a loss of 600 million in the current quarter.

BASF also said It suffered in the second quarter because of delays in new production plants in Asia and Germany coming on stream, but were not yet contributing to earnings.

The Ludwigshafen-based company said it is committed to increasing operating profit by 10 percent for the years 2000 to 2002.

Shares in BASF (FBAS) fell 5.2 percent to 42.10 in early Frankfurt trade. Its rivals also came under pressure Bayer (FBAY), Europe's third-biggest, fell 2.9 percent to 44.31 and Degussa (FDGX), a specialty chemical maker, declined 1.3 percent to 32.47.

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