Following the example of the Coatings division (paints and coatings), the Battery Materials division and the Agricultural Solutions segment are also to be spun off into independent companies, as the chemical company announced at an investors update in Ludwigshafen.
With battery materials for e-mobility, BASF aims to generate an adjusted EBITDA margin of at least 30 percent by 2030 (excluding metals). The agricultural business should generate an adjusted margin of at least 23 percent in the medium term, and coatings at least 15 percent. A return target of 17 percent applies across the chemical cycle for the remaining group businesses with the Chemicals, Materials, Industrial Solutions and Nutrition & Care segments.
From 2024, adjusted EBIT as the previous central control parameter will be replaced by adjusted EBITDA. In addition, there should be an annual forecast for free cash flow, explained BASF. BASF also wants to issue corresponding forecasts for all individual segments.
BASF also sets a target for the so-called Scope 3.1 CO2 emissions from the supply chain, which are difficult to control. Since there is now sufficiently reliable primary data on the emissions of purchased raw materials, there is a solid basis for a concrete target. By 2030, BASF is aiming to reduce emissions across its entire portfolio by 15 percent compared to 2022 – from 1.57 to 1.34 kilograms of CO2 per kilogram of purchased raw material. By 2050, BASF also wants to be climate-neutral in its raw material purchasing.
No more sales forecasts in the future
The chemical company BASF is spinning off two of its divisions. Following the example of the coatings business, the battery materials and agriculture areas are also to be transformed into independent units. A company spokesman confirmed corresponding information from the IGBCE union on Thursday. However, there are no plans to sell the divisions or lay off employees. According to the union, the spin-off will affect almost 2,500 jobs at the company headquarters in Ludwigshafen alone. Meanwhile, BASF no longer wants to name sales targets in the future and is setting margin targets for individual business areas.
By spinning off the battery, agricultural and coatings business, the board says it wants to give the areas more freedom so that they can better adapt to their customers. The businesses with basic chemicals (Chemicals), plastics (Materials), additives (Industrial Solutions) and ingredients for consumer goods (Nutrition & Care) will remain highly integrated.
The union harshly criticized the planned spin-offs. “The year ends, as it began, with bad news for the employees,” said IGBCE district manager Gunther Kollmuß, according to the statement. The outsourcing affects almost ten percent of the workforce there in Ludwigshafen alone. Kollmuß was positive about the fact that there should be no layoffs. The union and the works council are now pushing for a “location agreement 2030” for the association and all units affected by the current development.
Meanwhile, following the slump in business this year, the board no longer wants to give any sales forecasts from 2024 onwards. As of the balance sheet presentation on February 23rd, there will only be targets for earnings before interest, taxes, depreciation and special items (adjusted Ebitda) as well as cash inflow, the DAX group announced at an investor event in Ludwigshafen. BASF is also changing its central operating profit figure: previously, the focus was on earnings before interest, taxes and special items (adjusted EBIT).
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Starting next year, the goals in the individual divisions will also revolve around the new main key figure for operating profit (adjusted Ebitda) and cash inflow. The Executive Board is aiming for an adjusted operating margin (adjusted Ebitda margin) of 17 percent for the Verbund business, which is to be achieved across the chemical cycle. For battery material without metals, the margin should reach at least 30 percent by 2030, and for coatings at least 15 percent in the medium term. In the agricultural business, the board is aiming for a margin of at least 23 percent in the medium term.
The Russian war of aggression against Ukraine and its consequences for the economy have severely shaken BASF. In 2022, the withdrawal of the company’s subsidiary Wintershall Dea from Russia and the write-downs on its stake in the gas pipeline company Nord Stream AG caused the chemical giant BASF to lose billions.
In 2023, the weak economy had an impact on business: in July, management cut its sales forecast from the previous 84 to 87 billion euros to just 73 to 76 billion euros. The outgoing CEO Martin Brudermüller now only expects sales to be at the lower end of this range. In the previous year, BASF had achieved sales of a good 87 billion euros. In the first nine months of the current year, the group had sales of 53 billion euros, 22 percent less than a year earlier.
BASF had already launched a savings program in February and announced that it would cut 2,600 jobs, around two thirds of them in Germany. In October, the board also increased its savings target. Overall, annual costs are expected to fall by around 1.1 billion euros by the end of 2026, instead of around one billion as previously planned.
Meanwhile, management is becoming more ambitious about its planned reductions in CO2 emissions. BASF has long been committed to reducing CO2 emissions in its own operations and from purchased energy (Scope 1 and Scope 2) by 25 percent by 2030 compared to 2018, and the Ludwigshafen-based company wants to reach net zero by 2050. The board is now also focusing on the CO2 emissions of the purchased raw materials (Scope 3.1). Compared to 2022, this should decrease by 15 percent across the entire portfolio by 2030 and also be net zero by 2050.
Union IG BCE criticizes the measures
The IG BCE union spoke of bad news for the workforce shortly before Christmas. “The year ends for the employees as it began, with bad news that unsettles their colleagues,” explained district manager Gunther Kollmuß. The union insists on a documented waiver of sales; the new units must remain part of the BASF group. “When something is separated, it sounds like a sale to people. Experience shows that,” said works council leader Sinischa Horvat to the Reuters news agency. “But we were assured by management that the measures were only about making various areas more effective. BASF should remain an integrated company, and for this the company must build trust.”
The IG BCE and the works council also called for an extension of the location agreement at the main plant until 2030. According to the current location agreement, redundancies for operational reasons are excluded in Ludwigshafen until the end of 2025. CEO Martin Brudermüller announced a new austerity program in February that would result in the loss of 2,600 jobs worldwide, almost two thirds of them in Germany. Several energy-intensive systems at the main plant in Ludwigshafen are to be closed.
The news was well received on the stock market. The BASF share rose noticeably after the news from the early afternoon and was one of the strongest stocks in the DAX.
Ultimately, BASF shares closed 1.47 percent lower at 45.10 euros.
FRANKFURT (Dow Jones/dpa-AFX/Reuters)
Image source: BASF SE, BASF