BASF income hit by raw material costs BASF, the world's biggest chemical maker by sales, reported a 29 per cent decline in net income as plastics and chemicals margins came under pressure from high raw material costs. BASF had cautioned investors that the first half of the year would be tougher, with earnings still expected to rebound in the second half of the year. Nevertheless, the stock traded 1.9 per cent lower at €63.78 after the company said plastics sales had declined in the first quarter and margins were lower. "Increased raw material costs could not be fully passed on in all business areas, which put pressure on our margins," said Kurt Bock, chief executive. Increased oil and gas production and higher prices helped offset some of this margin pressure, however, and the company's agricultural division also performed comparatively strongly. BASF's portfolio ranges from absorbent material for babies nappies, to home insulation foams and automotive catalysts. Competitors in the Middle East benefit from low feedstock prices so BASF has in recent years sought to lower its exposure to commoditised petrochemicals and boosted its position in specialty chemicals. It has retained significant oil and gas production assets that provide a hedge against rising prices. BASF is also investing heavily in growth areas such as battery technology for electric vehicles, genetically modified plants and solar generation. Sales rose 6 per cent to €20.6bn but net income fell 29 per cent to €1.7bn and earnings before interest and tax, adjusted for one-off items, fell 7 per cent to €2.5bn, beating a Bloomberg-compiled analyst forecast of €2.4bn Operating earnings in chemicals and plastics were lower by 39 per cent and 41.5 per cent respectively. In contrast oil and gas operating income jumped 56 per cent and agricultural solution earnings rose 22 per cent. Earnings per share declined 28 per cent to €1.88. In the prior year BASF's financial results had been boosted by €887m from the sale of shares in K+S, the fertiliser maker. BASF reiterated that it aims to increase sales and operating earnings this year. "Our forecast will be especially supported by the resumption of our crude oil production in Libya as well as by growing volumes in the chemicals business," Mr Bock said.