The world’s largest chemical group, BASF, wants to stop its downward trend by stepping on the brakes on costs, cutting back investments and reducing inventories. “Together with the initiatives already underway in our global service units, we will reduce fixed costs by the end of 2026, so that from then on they will be around one billion euros less every year,” said the new CFO Dirk Elvermann on Friday in Ludwigshafen. By the end of 2023, the chemical giant expects annual savings of more than 300 million euros from the savings program with a focus on Europe.
Superfluous costs such as travel should be avoided wherever possible, explained the CFO. Investments in property, plant and equipment in the current year are expected to be EUR 0.6 billion lower than initially announced at EUR 5.7 billion. Some investments are to be postponed to the year after next.
After a significant drop in earnings in 2022, the BASF board of directors announced that it would cut 2,600 jobs worldwide, among other things due to high energy costs and the weak economy. Almost two-thirds of this will be in Germany. Due to high gas prices, several chemical plants are also to be shut down.
Drop in sales and profits
The framework conditions in Europe are becoming increasingly difficult, said CEO Martin Brudermüller. However, the company will continue to invest not only in China and the USA, but also in Europe. There are therefore no relocations at BASF. The planned closures in Europe are independent of other markets.
After the significant drop in earnings in 2022, the world’s largest chemical company posted a significant drop in sales and profits in the second quarter of the current year. Revenue fell by a quarter to 17.3 billion euros. Earnings before interest and taxes (EBIT) and special items fell year-on-year by more than half to one billion euros. Net profit fell from a good two billion euros in the previous year to 499 million euros.
“We recorded low demand from our most important customer sectors, with the exception of the automotive industry,” explained CEO Brudermüller. Overall, BASF had to deal with lower prices and volumes in the second quarter. For the second half of the year, the manager does not expect any further weakening of demand. “Because the inventories of chemical raw materials in most customer industries have already been greatly reduced.” However, the board only expects a tentative recovery.
