London, 27 July (Argus) -- A higher tax bill caused German chemical giant BASF second quarter profit to dip by 1pc year-on-year, despite higher sales prices that supported an increase in sales revenue. Profit fell to €1.48bn ($1.72bn), from €1.5bn in the same period of last year.

BASF reiterated its forecast for a slight increase in sales and earnings before interest and tax (Ebit) in 2018, although said it is closely monitoring the potential effect of geopolitical developments and trade conflict between the US and China, which have "significantly" raised economic risk.

The company's tax rate increased to 25.8pc from 22.5pc as a result of higher earnings contributions from companies in countries with a higher tax take, particularly in Norway where sales in oil and gas business Wintershall rose after production started at new fields.

Oil and Gas was BASF's fastest growing segment. Increased volumes and higher prices drove a 24pc profit increase. Plans to merge Wintershall with Russian company LetterOne's oil and gas business Dea will lead to results from the oil and gas segment being retroactively separated from BASF's results from the start of 2018 once the deal is complete.

BASF chairman Martin Brudermueller said the company expects to sign contracts with LetterOne "within the next weeks", and the agreement could be finalised in the first quarter of 2019, subject to regulatory approval.

Wintershall has exploration and production assets in the Norwegian, Danish, Dutch and UK sectors of the North Sea, as well as in Russia, Argentina and the Middle East. It has gas-transport operations in Europe in partnership with Russia's state-controlled Gazprom. Dea has production in the Norwegian North Sea, Germany, Denmark and Egypt, and licences in Libya, where it made finds in the Sirte basin.

Elsewhere within BASF, second quarter revenues rose by 2pc year-on-year in the chemicals segment and 5pc in the functional materials segment -- higher prices in both segments were offset partly by negative currency effects. Within these segments, sales volumes of acetylenics and carbonyl derivatives grew particularly strongly, while higher precious metals prices underpinned high prices and a 13pc revenue increase in the catalysts division.

Sales in performance products fell by 5pc, although margins and Ebit were slightly up compared with the second quarter of 2017. The drop in sales revenue was attributed to negative currency effects and lower volumes of citral-based products following a fire at the company's Ludwigshafen, Germany, citral plant in October 2017.

Sales revenue in the agricultural solutions segment fell by 2pc, with lower volumes in North America -- particularly of fungicides in Canada because of a late start to the season and high downstream inventories -- and negative currency effects offsetting higher volumes in all other regions.

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