BASF Plans European Austerity as Outlook Dims

13.10.2022 - Against the backdrop of weaker than expected third-quarter earnings – “significantly worse” in Europe and a negative result in Germany – as well as deteriorating framework conditions, BASF is launching a cost-saving program focused on those two strategic markets.

The scheme is planned to run from 2023 until the end of 2024, though the German group said initial cost cutting measures will begin immediately, as far as possible.

More than half of the targeted savings is expected to be realized at the Ludwigshafen headquarters site, which is also BASF’s largest and one of the largest chemical sites in Europe.

Over the two-year course, the program is forecast to generate annual cost savings of €500 million in non-production areas. Operating, service and R&D divisions as well as the corporate center are due to be streamlined, the chemical giant said.

European production to be “structurally adjusted”

In the medium-to-long term, BASF said it additionally plans to “structurally adjust” its integrated European production network, which it calls “Verbund”. Details are due to be communicated in next year’s first quarter.

Figures for the third quarter show a sales rise of 12% to just under €22 billion, thanks largely to higher selling prices and currency effects, while EBIT before special items crumbled nearly 28% to €1.35 billion as higher energy and raw materials costs could not always be pushed on.

For full year 2022, BASF said the outlook published in July remains unchanged. EBIT before special items is estimated to come in between €6.8 billion and €7.2 billion.

Net income is expected to hover around €909 million. The figure includes impairments for the group’s shareholding in the oil and gas joint venture Wintershall-Dea, which it has had to partially write down.

Author: Dede Williams, Freelance Journalist