Martin Brudermüller, CEO of the chemical company BASF, says goodbye with bad news for the employees at the headquarters in Ludwigshafen. The group will save more and cut more jobs than previously announced. The CEO did not give a number on Friday in Ludwigshafen; details are now being worked out. This will then be explained by his successor Markus Kamieth, who will replace Brudermüller as CEO at the general meeting at the end of April.
It is the second savings program that Brudermüller has announced. The group had already launched one in October 2022 and specified it in February 2023. It envisaged savings totaling 1.1 billion euros and the reduction of 3,300 jobs worldwide by the end of 2026, 700 of which would be in production in Ludwigshafen alone. In 2023, Brudermüller said on Friday, 600 million euros will have already been saved. The new cost-cutting measures only affect Ludwigshafen, which is still by far the largest location with a good 38,700 employees. About two thirds work in production. In Ludwigshafen, BASF wants to save an additional one billion euros by the end of 2026, both in production and administration.
“The situation is serious, so we are not explicitly ruling out any measures.”
“The situation is serious, so we are not explicitly ruling out any measures,” said Brudermüller. According to him, further plants in Ludwigshafen will probably be shut down. But the board stands by the headquarters. There will be no long-term competitive BASF Group without a profitable Ludwigshafen location, assured Brudermüller. And Ludwigshafen will remain BASF’s largest location in the world in the long term.
Martin Brudermüller at his last annual press conference as BASF CEO. He struggles with Germany as a location.
(Photo: Uwe Anspach/dpa)
The additional savings package is a hard blow, says Sinischa Horvat, chairman of the works council at BASF SE, in response to SZ questions. It is understood that the board has to act, especially because of the reduced productivity in difficult economic conditions. Politicians in particular must now work on significantly improved framework conditions for industry. In addition to the cost-cutting measures, management is expected to provide, according to Horvat, a “positive list” of measures and projects with which the Ludwigshafen location can be led into a good future again.
The market environment is extremely difficult, said Brudermüller. The problems in Germany are now structural and will not go away when the market recovers again. You have to say goodbye to the idea that “the good old days will come back, they’re gone forever,” says Brudermüller. The complaint about the weaknesses of the German location, especially the high energy prices, is not new. While all important countries still made a positive contribution to earnings in 2023, the group in Germany made a loss in Germany, as in 2022 – before interest, taxes and special items it was around 600 million euros in 2023.
The group, which has around 112,000 employees worldwide, presented its first figures for the 2023 financial year in January. Sales fell by a good fifth to 68.9 billion euros and remained below the forecast of 73 to 76 billion euros. This is from mid-July 2023 and at that time BASF had already corrected its original forecast of 84 to 87 billion euros. Operating earnings before interest, taxes and special items fell by 44.7 percent to 3.8 billion euros. After taxes, the group made a profit of 379 million euros, and in 2022 there was a loss of 391 million euros. The free liquid assets (free cash flow) fell by 18.5 percent to 2.7 billion euros in 2023. According to Brudermüller, this could largely cover the dividend of 3.40 euros per share planned for 2023, which corresponds to a total distribution of three billion euros.
The low global demand will not last, says Brudermüller. However, he doesn’t expect a quick recovery either. In December, BASF announced that it would control the group from 2024 on the basis of new key figures. As a result, the group will no longer provide a sales forecast in the future. Earnings before interest, taxes, depreciation and special items are expected to be between eight and 8.6 billion euros in 2024. In 2023 it had collapsed by almost 29 percent to 7.7 billion euros. BASF forecasts free liquid assets to be between 0.1 and 0.6 billion euros in 2024.
His successor, Markus Kamieth, has some delicate tasks ahead of him. This also includes the separation from Wintershall Dea, which has already been initiated. Significant parts of the oil and gas business outside Russia are to merge with the British company Harbor. In return, BASF will receive a cash payment of $1.56 billion and a 39.6 percent stake in the expanded Harbor, explained CFO Dirk Elvermann. According to media reports, critics, including politicians, are concerned about security of supply in Germany. Elvermann tried to dispel them. Wintershall Dea’s German oil and gas production covers around one percent of domestic oil and gas consumption. In order to secure Germany’s energy supply, it is therefore not crucial whether the E&P activities currently managed by Wintershall Dea will be operated by a German or a British company in the future. BASF is aiming for completion in the fourth quarter of 2024.