DThe chemical company BASF is launching another cost-saving program due to weak demand in Europe. The DAX group announced on Friday in Ludwigshafen when presenting the final annual figures for 2023 that additional costs of one billion euros should be saved annually at the Ludwigshafen site by 2026. It is urgently necessary to “take further decisive measures to improve our competitiveness,” explained CEO Martin Brudermüller when presenting the annual balance sheet. The result in Germany is suffering from the significant losses at the company’s largest production site in Ludwigshafen.
Costs should be saved both in production and in areas outside of production. The fixed costs are to be reduced by increasing efficiency in the company structures and the production capacities are to be adapted to market requirements. “Unfortunately, the program will also entail further job cuts,” said company boss Martin Brudermüller. The details are currently being worked on.
Plants are shut down
A year ago, Brudermüller had already announced tough cuts to make the company weatherproof. 2,600 jobs worldwide are falling victim to this, almost two thirds of them in Germany. Several energy-intensive systems at the main plant in Ludwigshafen were to be closed; according to information at the time, 700 production jobs were affected. With its savings program, BASF is targeting total annual savings of around 1.1 billion euros by the end of 2026. From the end of 2026, another 500 million should be added annually. The measures also include the reduction of jobs and the closure of several chemical plants.
The energy-intensive chemical industry suffers from the comparatively high energy prices in Germany – BASF, as the largest industrial gas consumer in this country, feels this like no other company. According to the Ifo Institute, the demand situation in the chemical industry continued to deteriorate in January, and hopes for more orders from abroad were largely dashed.
New boss is coming
Brudermüller takes stock of the world’s largest chemical company for the last time. At the end of the general meeting at the end of April, he will hand over the helm to Asia boss Markus Kamieth and will then lead the Mercedes-Benz supervisory board. Kamieth now has to lead the group out of the deep crisis that led to a slump in sales and earnings at BASF last year. BASF published preliminary figures for 2023 at the beginning of January, which missed both analysts’ expectations and the company’s already lowered targets. The operating profit (EBIT) before special items fell by 45 percent to 3.8 billion euros, and sales shrank by a good fifth to 68.9 billion euros.
Earnings are expected to increase again in 2024; the forecast that BASF has been basing on adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) since this year sees an increase to 8.0 to 8.6 (2023: 7.7) billion euros before. The company no longer publishes sales targets. The free cash flow is likely to shrink to 0.1 to 0.6 (previous year: 2.7) billion euros due to high investments in the new Verbund location in China. These will reach their “absolute peak” in 2024 and are expected to decline in the following years. Meanwhile, shareholders will receive an unchanged dividend of EUR 3.40 per share for the third year in a row.
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