BASF Chief Touts new Group Strategy

22.11.2018 -

Martin Brudermüller, CEO of BASF since May, this week unveiled a new business strategy aimed at guiding the chemical giant through expected and unexpected turbulence ahead. In a nutshell, the company with €64.5 billion in annual sales and €12.5 billion in EBITDA before special items in 2017 is striving to improve earnings by 3-5% annually and  to grow its currently lagging volumes faster than global chemical production.

On the path to achieving its targets, BASF will implement a new excellence initiative from 2019 through 2021, which it hopes will generate an addition €2 billion in EBITDA annually, while subscribing to more sustainable and efficient production, embracing digitalization and attempting to lift the profile of its share on international stock exchanges.

On the financial side, the emphasis going forward will be on creating leaner and more flexible hierarchies and building closer ties with customers and outside partners. In an effort to promote decision-making farther down the corporate “feeding chain,” some functions are planned to be devolved to the business units.

In aligning its forward focus, BASF’s management has redrawn product segments to strengthen performance- and market-orientation, while providing more transparency. In part to facilitate dialog with customers, the six segments – Chemicals, Materials, Industrial Solutions, Surface Technology, Nutrition & Care and Agriculture – will include products that fit more logically together than in the last structural realignment dating from 2011.

Based on 2017 figures, the Materials segment, including engineering polymers and their monomers, will be by far the biggest, accounting for 35% of group EBITDA. Chemicals (in the main petrochemical feedstocks and base products) will account for 25%, Industrial Solutions (dispersions and pigments) for 12%, Surface Technologies (catalysts and coatings) for 10%, Nutrition and Care (care chemicals and nutrition & health) for 9% and Agricultural Solutions for 12%.

The makeup of Industrial Solutions, which includes additives and formulations, may be the most fluid. The Construction Chemicals business unit has been “parked” there, pending divestment or a partnership. Part of the new orientation, Brudermüller told journalists in Ludwigshafen, will be to focus on organic growth rather than acquisitions. Businesses that no longer seem a good fit may be put up for sale.

In the sustainability column, BASF has committed to keeping its global greenhouse gas emissions flat at the 2018 level up to 2030 – despite higher production levels – after slashing them by half from 1990 to the present. Along with developing new biopolymers and buying in more electricity from renewables sources, in a project it calls ChemCycling, the group is promoting the development of new technologies for chemical recycling of waste plastics into feedstocks.

Geographically, BASF plans to devote considerably more resources to its operations in Asia – in particular China, its fastest-growing market, where it is currently expanding its existing hub at Nanjing and building a new hub at Guangdong. Altogether, the German chemical producer has sales of just over €14 billion in Asia, led by China with around €10 billion.

While Europe as home market and biggest production center, will remain important, Brudermüller and CFO Hans Engel – who has managing board responsibility for North America – seem to be taking a new look at the strategic importance of the US, where BASF has invested heavily in recent years. As in the past, the group is not interested in shale gas exploration projects, but will orient feedstock projects around the best price.