The chemical company BASF is suffering from rising energy prices and cost pressures. Some plants have already been closed, and more could follow at its largest site. In addition, management is planning to spin off individual divisions.
The chemical company BASF does not rule out the possibility of shutting down additional plants at its main site in Ludwigshafen but will continue to rely on its home base on the Rhine. “Further measures to adjust plants are currently being reviewed and will be implemented step by step as necessary,” said site manager Katja Scharpwinkel, without providing details. The majority of the plants are competitive in their respective markets. “However, our results also show that some plants and production lines are no longer generating sufficient returns due to a lack of competitiveness or structural underutilization.”
Some measures have already been implemented, such as the closure of the plants for adipic acid, cyclododecanone (CDon), and cyclopentanone (CPon), which were announced at the end of August. The goal for Ludwigshafen is to be “a leading, sustainable chemical site for Europe and a strong pillar for BASF’s success.”
Comprehensive Measures Package
In addition, the group will adjust its structures outside production in Ludwigshafen and significantly reduce costs through a comprehensive package of measures, Scharpwinkel emphasized. As previously announced, BASF aims for ongoing total savings of around 2.1 billion euros annually by the end of 2026. “The Ludwigshafen site will be leaner but stronger. It will have a better competitive position in the European market and will be able to operate successfully in the medium and long term.”
BASF Plans to List Its Agricultural Division
The world’s largest chemical company plans to list its agricultural division on the stock market. This was announced by CEO Markus Kamieth during the presentation of the new strategy of the DAX-listed group in Ludwigshafen. By 2027, the business will be spun off into separate entities. Subsequently, conditions will be created to bring a minority stake in the division to the stock market in the medium term.
In the coming years, the chemical company will focus on strengthening its core businesses and growing profitably, Kamieth explained. Through corporate restructuring, cost-saving measures, and lower investments, operating profit is expected to rise significantly in the medium term. Adjusted for special effects, earnings before interest, taxes, depreciation, and amortization (EBITDA) should range between 10 and 12 billion euros by 2028. In 2023, BASF earned just under 7.7 billion euros operationally, a decrease of nearly 29 percent compared to the previous year.
However, BASF may not be able to pay as much dividend as in recent years. The direct profit share is expected to remain at a minimum of 2.25 euros per share in the coming years, the DAX company announced. For 2023, BASF paid 3.40 euros per share. The annual dividend total will be around two billion euros in the coming years, it added. Between 2025 and 2028, a total of around eight billion euros is expected to be distributed. This will be complemented by share buybacks, which are expected to be pursued by 2027, amounting to about four billion euros.
Minister Schmitt: “Industrial Deal” at the European Level
Rhineland-Palatinate’s Minister of Economic Affairs Daniela Schmitt said that the current developments at BASF show how challenging the economic situation in Germany is. “It is very clear: Any additional burden on our economy is one too many. We need to reduce and simplify regulations. This applies to all political levels – EU, federal, and state,” the FDP politician told the German Press Agency. “Alongside a commitment that we also want to be a strong industrial location in the future, we urgently need an ‘Industrial Deal’ at the European level.”
Everything that now further burdens the economy, reduces value creation, and destroys secure, good jobs must be stopped, Schmitt stressed. “Especially now, the breadth and depth of industrial value creation at the location Germany must be secured overall.” The consequences of federal energy policies, “which unfortunately have been oriented for far too long without a medium- and long-term strategy,” are now being felt. “Germany needs a reliable and affordable perspective for energy-intensive companies.”
Works Council and Union: Strong Criticism of BASF Management
The exclusion of redundancies at BASF’s Ludwigshafen headquarters must be extended until 2030, demands the works council. The management’s course is causing great concern. The chemical union IG BCE and BASF’s works council have sharply criticized the new strategy of the Ludwigshafen-based chemical giant. The DAX company’s management is primarily concerned with saving costs. That alone is not enough as a concept for a successful future and the protection of the sites. The focus must be on investing proactively to advance the modernization of European sites.
“Due to the many cost-saving programs, BASF employees feel powerless. For them, it is a time of great uncertainty,” said BASF works council chairman Sinischa Horvat. The planned restructuring does not help. The works council is now focusing on negotiations to extend the site agreement at the Ludwigshafen headquarters. This agreement currently excludes redundancies until the end of 2025. The exclusion of redundancies must be extended until 2030, Horvat demanded.
Roland Strasser, head of the Rhineland-Palatinate/Saarland district of the Mining, Chemical, and Energy Union (IGBCE), said the employees “of the most important and largest” company in Rhineland-Palatinate are not only concerned about their own future. “They are also asking: What will happen to the region? What are the implications of these decisions for the entire value chain? And: Is BASF evolving into a management holding company?” Strasser emphasized: “Instead of constant spinoffs, cost-saving programs, and new strategic realignments, the company needs a bold, determined plan for the future of sustainable chemical production.”
Companies: Processes Made More Efficient
The Federation of Entrepreneurs’ Associations (LVU) expressed concern about jobs at the entire industrial site of Rhineland-Palatinate. “Acute measures, particularly lowering energy prices, are urgently needed,” said LVU Managing Director Karsten Tacke in Mainz. As an above-average energy-intensive industrial location, Rhineland-Palatinate is still far from being competitive again. “In addition, it is high time that the long-standing promises of cutting red tape are finally followed by action.”
Tacke emphasized that the attractiveness of Rhineland-Palatinate as a location would only increase if companies are quickly “freed from the many unnecessary reporting and documentation obligations.” Furthermore, the overall number of regulations and prohibitions should be permanently reduced, and all political levels must seriously ensure that their own administrative procedures and processes are made more efficient.
Source: dpa