Key Points:
- BASF will cut costs by 1 billion euros annually at its Ludwigshafen headquarters due to weak demand and high energy costs in Germany.
- CEO Martin Brudermueller emphasizes the need for decisive actions to enhance competitiveness amid challenging economic conditions.
- BASF aims to rebound group earnings before interest, taxes, depreciation, and amortization to between 8 billion and 8.6 billion euros in 2024.
- Despite challenges, BASF reaffirms its commitment to its headquarters and proposes an unchanged annual dividend per share.
Germany’s chemical giant BASF announced plans to reduce costs by 1 billion euros annually at its Ludwigshafen headquarters, citing sluggish demand and high energy costs in its home market. This move reflects the broader economic challenges facing Germany.
The cost-saving measures, set to be achieved by the end of 2026, will impact both production and administrative activities at BASF’s largest chemical complex. CEO Martin Brudermueller emphasized the need for decisive actions to enhance competitiveness, particularly in light of the tough economic conditions in Germany.
Despite the challenges, BASF aims to rebound its group earnings before interest, taxes, depreciation, and amortization (EBITDA) to between 8 billion and 8.6 billion euros in 2024, following a 29% decline to 7.67 billion euros last year. However, the company’s 2024 free cash flow guidance of 100 million to 600 million euros disappointed the market, leading to a 1.6% stock drop.
Brudermueller highlighted the high competitiveness of BASF outside of Germany amid challenging conditions while acknowledging the urgent need for measures to address negative earnings at the Ludwigshafen site. The economic downturn at home has impacted volumes in BASF’s specialty chemicals and upstream petrochemicals business, necessitating further job cuts.
BASF’s Ludwigshafen site, although the largest production complex, will continue to shrink and transition towards importing basic chemicals from low-cost regions. This shift is driven by significantly higher natural gas costs in Europe compared to the United States.
The company’s plans to reduce costs and optimize operations follow previous initiatives announced last year, including site closures, cost cuts, and job reductions primarily affecting the Ludwigshafen site. BASF’s Ludwigshafen complex has faced challenges exacerbated by changes in energy costs and geopolitical factors.
Despite the difficulties, BASF reaffirmed its commitment to its headquarters and proposed an annual dividend of 3.40 euros per share, unchanged from the previous year.
