BASF has reported growing profit from its oil and gas unit as production ramped up in Libya, helping to offset the lower volumes and high raw material prices that weighed on its legacy chemicals and plastics businesses.

The world's largest chemicals maker by sales said first-quarter earnings before interest and tax (EBIT) adjusted for one-off items declined less than expected, easing 7.3 per cent to 2.53 billion euros ($3.35 billion) compared with a consensus forecast of 2.32bn euros.

BASF, whose products range from catalytic converters and car coatings to insulation foams, said yesterday it still saw sales and operating earnings rising this year as growth would kick in during the second half of the year following year-on-year declines in the first half.

Quarterly adjusted EBIT from oil and gas trading of 1.16bn euros beat estimates by almost half, but lower sales volumes of engineering plastics in the key Asia-Pacific region and higher raw material prices weighed on its chemicals and plastics units.

While oil above $100 per barrel and uncertainty about the global economy is a toxic mix for most chemical makers, BASF's self-styled 'natural hedging' in the form of its fossil fuel business provides a counterbalance.

But oil is also the basic feedstock for almost all chemicals and plastics.

In the first quarter, crude oil traded about 10 per cent higher on average than a year earlier, while BASF chemicals and plastics price mark-ups were only 5pc on average.

'We absolutely have to go for further price increases,' finance chief Hans-Ulrich Engel said during a conference call.

BASF's comments come after quarterly sales at Dow Chemical, the largest US chemicals maker, came in below forecasts. Dutch group AkzoNobel, the world's largest paints maker, said economic uncertainty, even in some emerging markets, as well as high raw materials prices posed challenges this year.-Reuters