On the walls of the conference center at BASF’s headquarters in Ludwigshafen there are slogans that should be to the liking of CEO Martin Brudermüller. “The future is not what you dream, but what you make” is one of the sentences: “The future is not what you dream, but what you make.” Brudermüller is also such a doer. And there is a lot to do before he retires in spring 2024.
The increased prices for natural gas, which the chemical company uses both as a raw material and as an energy source, as a result of Russia’s war of aggression in Ukraine, are having a severe impact on business. Markets collapsed. According to BASF, Ludwigshafen will account for around four percent of all gas consumption in Germany in 2021. In 2022, BASF had 3.2 billion euros higher energy costs worldwide, of which 2.7 billion euros were attributable to Europe and above all to the Verbund site in Ludwigshafen.
Brudermüller expects natural gas prices in Europe to remain significantly higher “in the long term” than in previous years, especially when compared to other regions, particularly the US and the Middle East. “Competitiveness is not an absolute, but a relative value,” said Brudermüller on Friday at the balance sheet press conference. As always, he laments the “over-regulation” in Europe, the “slow and bureaucratic approval procedures” and the high costs for many production factors. That has been the case for many years. Energy prices were an additional burden.
“Most” will be offered a job in another company
BASF has to save. The group wants to streamline structures and bundle central services such as procurement or IT in its “hubs”. As a result, 3,500 jobs will be lost across the group, a good half in Ludwigshafen. However, 900 jobs are also to be created in the hubs. In production in Ludwigshafen, another 700 jobs will be affected due to the shutdown of plants. There will be no redundancies there until the end of 2025 due to a works agreement. Brudermüller expressed his confidence that “most” of the 700 employees affected from Ludwigshafen could be offered jobs in other BASF companies. This is mainly due to one reason: “The baby boomer generation is hitting the ground running,” says Melanie Maas-Brunner, CTO and responsible for Ludwigshafen. The number of employees retiring is increasing and there are vacancies. Meanwhile, the works council and the IGBCE trade union criticized the job cuts in their own press conference on Friday. The announcement “triggered fear, anger and desperation in the workforce,” says Sinischa Horvat, head of the group works council and member of the BASF supervisory board. BASF needs people for the planned transformation to green energy and the circular economy.
In Ludwigshafen, some plants will be shut down, including one of the two for the production of ammonia. According to Brudermüller, Ludwigshafen uses the largest quantities of natural gas as a raw material for its manufacture. Ammonia is the starting material for many products, for example fertilizer and many plastics. Most of the systems are older and have long since been written off. This does not apply to the TDI system, which is also to be shut down, it is not that old. It also supplies primary products for plastics, from which, for example, foams for mattresses and posters for car seats are then made. It cost more than a billion euros. The then Federal Minister for Economic Affairs, Sigmar Gabriel, attended the inauguration in November 2015. He was quoted in reports from the time as describing it as an “important building block for maintaining Germany’s industrial base”. From today’s perspective, one has to say that the TDI system never ran smoothly.
There have always been adjustments in Ludwigshafen. It will remain the group’s largest and most integrated site, says Brudermüller. “We’re not shutting down Ludwigshafen.” In the future, however, he will concentrate more on supplying the European market.
Brudermüller sticks to China and builds a new location
The group had already published the first figures for the 2022 financial year in mid-January. Sales rose by a good eleven percent to 87.3 billion euros, earnings before interest and taxes fell by almost 15 percent to 6.5 billion euros. After taxes, the group made a loss of 627 million euros after a profit of 5.5 billion euros in the previous year. In Germany, BASF made an operational loss in 2022. In the fourth quarter of 2022, sales fell by 2.3 percent to 19.3 billion euros, earnings before interest and taxes collapsed to 119 million euros, which is almost a tenth of the operating profit in the same period last year. After taxes, there is a loss of 4.8 billion euros in the quarter after a profit of almost 900 million euros in the fourth quarter of 2021. Non-cash impairments of 4.7 billion euros were incurred for the investment in the energy group Wintershall Dea alone. BASF wants to get rid of the stake.
Brudermüller wants to stick to the investments in China. In Zhanjiang, BASF is building a new site for ten billion euros. “You can’t do something like that half or three quarters. You can only do it completely or not at all,” says Brudermüller. “We are aware of the risks, but the opportunities outweigh the risks.” He now asks a few questions himself and immediately provides the answers. “Are there risks: Of course. Is there also a risk of disaster from an attack on Taiwan? There is also that. In extreme cases, that would probably mean a total failure of our China business far beyond the location,” says Brudermüller. “If that happens, that won’t be our only problem. Then no stone will be left unturned in the global economy.”