Ludwigshafen, Germany - BASF, the world's biggest chemicals company, reported Thursday a third-quarter drop in profit despite an increase in sales.

Income from operations (EBIT) before special items declined to 1.57 billion euros (2 billion dollars), a drop of 8 per cent from the corresponding period of 2007, the company said in a statement.

Net income declined 37.5 per cent to 758 million euros amid increases in raw material costs, declining demand from important customer industries and the hurricanes on the US Gulf Coast.

"The impact of the global financial crisis on the real economy is speeding up and hitting harder," said Juergen Hambrecht, chairman of the board.

"The economic skid marks can no longer be ignored. The decline in demand in important markets, stockpiling by our customers and the fall in oil prices are all signs of a recessionary trend that is likely to sharpen in 2009," he added.

"We have therefore revised our assumptions and are now reckoning with global economic growth in 2008 of below 2.7 per cent and chemical production growth of below 2.0 per cent," Hambrecht said.

Earnings before tax dropped 10.7 per cent to 1.5 billion euros, with chemicals and plastics among the segments reporting a slump in profits.

Overall, sales rose by 13 per cent to 15.8 billion euros, better than analysts expected. Adjusted for currency effects, sales grew by 18 per cent.

Worldwide, BASF said it was responding to declining demand by adjusting capacity utilization rates and bringing forward maintenance-related shutdowns.

In addition to ongoing activities to reduce costs, the company said it has launched a new efficiency programme with the goal of increasing operational excellence and effectiveness.

BASF shares on the Frankfurt Stock Exchange dropped 3.5 per cent to 23.74 euros on news of the figures.

BASF has a total workforce of 96,695, down 1.6 per cent from a year ago. (dpa)