BASF to Cut Jobs in Further Cost Cutting at Ludwigshafen Site — Update

By Pierre Bertrand

BASF said it plans to expand cost-cutting measures at its flagship Ludwigshafen site in Germany, which will result in job losses, but forecast higher adjusted earnings despite continued economic weakness this year.

The German chemicals company said Friday that it intends to reduce costs at Ludwigshafen by a further 1 billion euros ($1.08 billion) annually by the end of 2026.

"The program will therefore also unfortunately lead to further job cuts," said Executive-Board Chairman Martin Brudermueller.

The move marks BASF's latest attempt to turn around the fortunes of its largest production center, against the background of a tough market for Europe's chemicals industry due to slowing demand and energy costs that remain high by historical standards. Several European chemicals companies, including BASF, issued profit warnings last year.

The company said earnings at Ludwigshafen weakened further in 2023, which Brudermueller said underscored the need for decisive actions to improve the hub's competitiveness.

BASF's latest plan adds to cost-cutting efforts begun in 2022 when Europe's chemical industry was upended by a spike in energy prices due to the war in Ukraine, and that were expanded last year.

The company said it was still working out the details of the plan and that employee representatives would be closely involved.

The company said it achieved an annual cost reduction rate of around EUR600 million by the end of 2023, and that by the end of 2026 it expects to have reduced annual costs by EUR1.1 billion. It previously said that its measures would affect 2,600 jobs.

Additional cost-cutting measures will affect its production and its nonproduction areas in Ludwigshafen, BASF said, adding that it intends to lower fixed costs by adapting production, and trim variable costs by redesigning some processes.

"BASF will do everything possible to again significantly increase the utilization rates of its competitive assets in Ludwigshafen. To generate solid earnings here, the company needs additional contribution margins from normal levels of plant utilization," the company said, adding that parts of the plant were operating at levels considerably below normal.

The company intends to develop Ludwigshafen into a low-carbon production plant focused on European customers. It will provide an update on plans for the facility in the second half of this year.

The company expects last year's economic weakness to continue in 2024. Nevertheless, BASF said it is targeting earnings before interest, taxes, depreciation and amortization before special items between EUR8.0 billion and EUR8.6 billion in 2024.

It made EUR7.67 billion in Ebitda before special items in 2023.

The company said it would propose a flat dividend of EUR3.40 a share for 2023.

Free cash flow is expected at between EUR100 million and EUR600 million due to temporarily higher investments.

As disclosed last month, BASF confirmed net profit for the year at EUR225 million, compared with a EUR627 million net loss in 2022, on sales that fell 21% to EUR68.90 billion.

Write to Pierre Bertrand at pierre.bertrand@wsj.com

(END) Dow Jones Newswires

February 23, 2024 05:28 ET (10:28 GMT)

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