BASF to cut costs by a further €1bn

23rd Feb 2024 11:47

(Sharecast News) - Germany's BASF Group is to slash costs by a further €1bn, the chemicals giant confirmed on Friday, as it battles higher expenses and falling earnings.

The cost-cutting programme will be focused on its home site of Ludwigshafen and affect both production and non-production.

BASF confirmed jobs would be lost, although it did not specify how many other than to note details were "still being worked out".

BASF is the world's largest chemicals manufacturer. But its energy intensive operations have left it grappling with higher costs and falling earnings. Demand has also softened worldwide, especially in China.

Sales in the year to December end fell to €68.9bn from €87.3bn, hit by "considerably" lower prices and volumes across all sectors.

Earnings before interest, tax, depreciation and amortisation slumped 29% to €7.7bn before one-off items.

Most countries posted positive earnings contributions in 2023, BASF noted. But in its domestic market, there were "substantial" negative earnings at Ludwigshafen, it largest production site.

Outgoing chief executive Martin Brudermuller said: "On the one hand this situation demonstrates the high competitiveness and health of BASF under challenging conditions at the global level.

"On the other hand, the negative earnings at Ludwigshafen show the urgent need for further decisive actions here to enhance our competitiveness."

BASF said it would target annual cost savings of €1bn by the end of 2026, on top of the €1.1bn already announced since Russia's invasion of Ukraine.

It also forecast group EBITDA before one-off items of between €8bn and €8.6bn in 2024.

As at 1130 GMT, shares in the Frankfurt-listed stock were down 2%.

Brudermuller is due to be replaced by Markus Kamieth, BASF's current head of China, in April.