2024-02-23 09:41:00
At the chemical company BASF, sales and results collapsed in 2023 due to weak demand, especially in Europe.
“In absolute terms, however, our teams made a positive contribution to results in all important countries – with the exception of Germany,” said Martin Brudermüller on Friday, according to a statement. The result in this country suffered from the significantly negative result at the largest production site in Ludwigshafen. It is therefore necessary to take further measures to improve competitiveness at the headquarters.
BASF therefore wants to save additional costs of one billion euros at the Ludwigshafen site by 2026, as the company announced when presenting the final annual figures for 2023. There should be savings both in production and in areas outside of it. Fixed costs should be reduced by increasing efficiency and production capacities should be adjusted to market requirements. “Unfortunately, the program will also entail further job cuts,” announced Brudermüller. Details on this are currently being worked out.
The BASF management had already announced an austerity program in 2022 due to worsening business and more difficult conditions in Europe, especially due to sharp increases in gas prices. This is intended to reduce annual costs by a total of 1.1 billion euros by the end of 2026. The measures also include the reduction of jobs and the closure of several chemical plants. By the end of 2023, costs had already fallen by around 600 million euros. The remaining 500 million euros in savings from the program will be added from 2026, the company said.
The BASF board of directors does not expect any significant improvement for the current year either. The weakness of the global economic dynamic from 2023 is likely to continue in 2024, the DAX group also announced. Growth is expected to only increase somewhat later in the year. In Europe, comparatively high energy prices and unfavorable conditions continued to slow down economic development. Global chemical production is expected to increase by 2.7 percent. This will be primarily driven by the expected growth of the Chinese chemical industry.
For the current year, BASF is targeting earnings before interest, taxes, depreciation and amortization (Ebitda) as well as special items of between 8.0 billion euros and 8.6 billion euros. In 2023, the result fell by almost 29 percent to almost 7.7 billion euros. The free cash flow is expected to be between 0.1 billion euros and 0.6 billion euros, after 2.7 billion euros in the previous year. BASF explains the significant decline with investments in China. BASF is currently building a new Verbund site in southern China for around ten billion euros. BASF had already presented preliminary annual figures for 2023 in mid-January.
As already known, in 2023 sales shrank by a fifth year-on-year to almost 69 billion euros. The decisive factor here was significantly lower prices and quantities. Sales fell in all segments as a result of weak demand from many customer sectors, it said. The bottom line was that shareholders received a profit of 225 million euros. In 2022, BASF reported a loss of 627 million euros due to depreciation worth billions in connection with its Russian business. The BASF board of directors wants to keep the dividend for 2023 constant at 3.40 euros.
In order to make the chemical company more profitable again, BASF announced in December that it would separate the agricultural chemicals, battery materials and paints and coatings businesses from the integrated system. These are to be converted into legally independent subsidiaries. These areas are less closely related to the rest of the group. Company boss Martin Brudermüller rejected the sale of the divisions.
In December, BASF also announced the long-awaited sale of Wintershall Dea to the British oil company Harbor Energy, which is scheduled to be completed in the fourth quarter of 2024. Wintershall Dea’s Russian business and its stake in Wiga are excluded from the transaction. The latter is active in the gas transport business – the operationally independent Wiga subsidiaries operate high-pressure pipeline systems, including the Gascade transport network as well as Opal and NEL. BASF holds a good 70 percent of Wintershall Dea. The rest belongs to LetterOne, a holding company.
Investors are responding favorably to BASF’s figures: BASF shares temporarily rose by 0.89 percent to 47.26 euros via XETRA.
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