German chemicals giant BASF AG on Tuesday reported a decline in third-quarter profits and forecast a weaker final quarter and a difficult 2002, owing to the sagging world economy.

The company has announced some 4,000 job cuts this year as part of a package of measures to counter the global economic slowdown. It said on Tuesday that this restructuring had left it well prepared to take advantage of a recovery when it occurs.

But Chief Executive Jürgen Strube stressed that neither the final quarter of 2001 nor the turn of the year would bring an improvement in the economic situation.

"The danger of a worldwide recession cannot be overlooked, and despite positive signals such as the stabilization of oil prices as well as low interest rates and low inflation, negative factors predominate," Strube told a news conference.

"We are therefore preparing for a difficult 2002," he said.Third-quarter operating profit before special items dropped 51.7% to 328 million euros on sales of 7.199 billion euros, down 21.7%.

BASF's two largest segments – plastics/fibres and performance products – fared worst but there were stronger performances from the oil and gas segment which bolstered the results.

BASF said in October it would not achieve its goal of raising operating income before special items by an average of 10% over the period 2000–2002. It said it expected operating profit to fall this year.

The group made clear on Tuesday this decline would be significant, but it would not make an operating loss in the final quarter, when incoming orders and orders in hand were already down.

The stock market appeared to take the latest BASF news in its stride. The share price quickly recovered from an early drop to close up 2.81% at 41,30 euros.