The world's largest chemical company by sales reported earnings before interest and tax (EBIT), adjusted for one-off items, of 1.91 billion euros (1.5 billion pounds), compared with the average forecast for 1.73 billion in a Reuters poll of analysts.

"In the first two months of the year, customers maintained a very cautious ordering approach. In March, however, business picked up in many of our divisions," finance chief Hans-Ulrich Engel told analysts on a call on Friday.

Earnings at BASF's basic petrochemicals division fell 36 percent, hurt by lower prices and volumes. The market had been bracing for a plunge of almost 50 percent.

Shares in BASF were 0.7 percent higher at 73.24 euros by 0806 GMT, making them the second-biggest gainers on the German blue-chip DAX index <.GDAXI>, which was 1.3 percent lower.

BASF is under pressure from growing Chinese competition in chemical building blocks such as caprolactam, a precursor material for polymers in tyre cord, textile fibres and power tool housings.

The group, whose products include catalytic converters, insulation foams and automotive coatings, said cost cutting was on track and that it would consider shedding more businesses facing too much competition.

"We will continue to refine our portfolio in 2016. Our goal is to concentrate on high-growth businesses," Chief Executive Kurt Bock said in a statement.

It has hived off units including industrial coatings, for a narrower focus on car coatings, and a smaller polyolefin catalyst business.

The group affirmed its forecast for a significant decline in 2016 sales - due to the sale of its gas trading business and as it adjusts prices to lower energy and raw material costs - and for adjusted EBIT to be slightly below the year-earlier level but repeated that the goal was ambitious and depended on oil prices.

(Additional reporting by Patricia Weiss; Editing by Maria Sheahan and Susan Thomas)