When you sit across from each other in a large hall after three years due to the pandemic, there is a lot to explain. Three years is a long time. And when BASF’s supervisory board chairman Kurt Bock greeted the shareholders in the Rosengarten Congress Center in Mannheim, people applauded. Finally clap again!
Sure, who would gossip in front of their computer just because the manager of a chemical company was appearing on the tile? So BASF does it differently than many other Dax companies, which still keep their distance from their shareholders and only want to meet them virtually. Health Minister Karl Lauterbach (SPD) had already declared the corona pandemic officially over at the beginning of April. Anyone who wants to can do it like the Ludwigshafen chemical company. In front of the computer, but also in the hall.
So three years in which a lot has happened. After Corona came the Russian war against Ukraine, high inflation, energy prices, rising tensions between the West and China, then the question became acute as to whether China would actually attack Taiwan at some point and what that could mean for the world.
Europe is weakening – so let’s go to China
For a Dax group that is weakening in its home region of Europe and that has had a different situation in terms of sales, profits and stock market prices, that is struggling with raw material and energy prices, that has to write off billions on the Russian activities of the energy subsidiary Wintershall Dea Austerity program pulls through the group and cuts thousands of jobs, many of them in Germany – for him these are no small issues. Especially if you also want to invest ten billion dollars in a new plant that is more than 9,000 kilometers away. In Zhanjiang, China. The country of all things, that is, about which one does not know exactly whether it might not soon invade a neighboring country militarily. They haven’t seen each other for three years, so there are many unanswered questions.
Welcome to the rose garden.
“We look forward to your report,” says Bock, the chairman of the supervisory board. But Martin Brudermüller, the head of BASF, does not report at all at first. The company has over 111,000 employees, some of whom are now speaking in a prepared video. The “C02 Footprint” team, someone from the “Renewable Energy” team, trainees. Someone says, “We have to make it, and we will make it. If we can’t make it, nobody can.”
The boss speaks of “stormy times”
Then the video is out again and now the man who is supposed to make it is on the stage. Most recently, profits fell by more than 30 percent, and Brudermüller, 61, speaks of a “hard and tough” half year and a very uncertain economic situation in the world. From “stormy times”. But the real question is, with all these storms out there, do you really need that one extra one?
BASF boss sees many opportunities in China. In any case, far more opportunities than risks.
(Photo: Uwe Anspach/dpa)
Why invest so much money in a new location in China, why divert all investments to the southern province of Guangdong, when relations between Beijing and Washington, China and Europe are cooling so badly? “The Russian attack on Ukraine has shown how quickly geopolitical nightmares can become reality,” says fund manager Arne Rautenberg of Union Investment, one of BASF’s larger investors. Brudermüller’s China strategy is “seen on the capital market as a high-risk strategy”, since a possible attack by China on Taiwan “could lead to a total loss of business in China”.
In the wrong place at the wrong time: That’s how it was in Russia
Hendrik Schmidt from asset manager DWS asks questions. For example: “How flexible is BASF with investments should the geopolitical tensions between the western world and China increase? Could such a large investment be at least partially scaled down?” And: How would one actually react if China were to decouple itself more? These are questions and objections that even the head of the world’s largest chemical company cannot simply let go of. Of course, and as the boss he has to say, everyone understands everything and has carefully examined the “opportunities and risks” of China investments. But ultimately, as it is, the opportunities for BASF are greater than the risks. The biggest risk is war. Or at least alienation, decoupling from China. On the other hand, according to Brudermüller, the People’s Republic accounts for around half of global sales in the chemical industry. There’s still a lot going on. The plan: continue to grow in China in order to compensate for crumbling business in Europe.
The problems of the oil and gas subsidiary Wintershall Dea show that being in the wrong place at the wrong time can be very complicated. Russia recently accounted for around 50 percent of all Wintershall business, and the Russian government has now de facto expropriated Wintershall Dea in Russia. And now? “We are working at full speed on different variants of the exit,” said Brudermüller. Preferably an IPO, but a sale to investors would also work. “But we are very confident that we can do it in the foreseeable future.” It’s sometimes easier to get into a market than out of it.