After months of criticism of its involvement in Russia, the BASF subsidiary Wintershall Dea is now drawing a line: the oil and gas company announced on Tuesday evening that it would “completely withdraw from Russia”https://www.sueddeutsche.de/wirtschaft/.” Eine Continuing our business in Russia is not sustainable,” said Mario Mehren, CEO of Wintershall Dea. “In recent months, the Russian government has restricted the activities of Western companies in the country. In addition, external interference in the activities of our joint ventures has meant that Wintershall Dea cannot operate in Russia as before. The joint ventures were de facto economically expropriated .” The company’s write-downs also related to its stake in Nord Stream AG, the operator of the damaged Nord Stream 1 gas pipeline.
Hardly any other company in Germany represents the close interdependence of the German energy industry with Russian gas production. Wintershall Dea has maintained close partnerships with the Russian company Gazprom for decades, produces gas with the world’s largest gas producer in Siberia and has a stake in the Nord Stream pipeline in the Baltic Sea.
Wintershall Dea was formed in 2019 from the merger of BASF subsidiary Wintershall and rival Dea. BASF still holds 72.7 percent of the joint venture, the rest is held by the former Dea owner LetterOne. Because of the war in Ukraine, Wintershall Dea recently continued to distance itself from its business in Russia and announced that it was examining a legal separation. The company is involved in three production projects at the Yuzhno Russkoye natural gas field and the Achimov formation of the Urengoy field in Siberia. The share of the Russian business in the total production was recently 50 percent.
In the fourth quarter, however, further value adjustments of 5.4 billion euros were incurred
Last year, billions in write-downs on its stake in the oil and gas group Wintershall Dea pushed BASF deep into the red. The chemical company made a loss after taxes of 1.376 billion euros after a profit of 5.523 billion in 2021, as BASF announced on Tuesday evening based on preliminary figures. On average, analysts had expected a profit of 4.768 billion euros, even if the company had already posted high write-downs on Wintershall Dea over the course of the year. In the fourth quarter, however, further value adjustments of 5.4 billion euros were incurred, as Wintershall Dea is now planning a complete withdrawal from its business in Russia. Overall, depreciation amounted to around 7.3 billion euros.
In 2022, BASF achieved a sales increase of eleven percent to 87.327 billion euros and thus reached its forecast of 86 to 89 billion euros. However, adjusted operating profit (EBIT) fell by a good eleven percent to 6.878 billion euros and was thus at the lower end of the forecast range. Analysts had expected a little more with 6.949 billion euros.
BASF boss Martin Brudermüller had already announced a new austerity program in October, after rising energy and raw material costs had caused earnings to collapse in the third quarter. There was even a loss in the German business. The energy-intensive chemical industry was hit hard by the exploding energy prices last year. As the largest industrial gas consumer in Germany, they put BASF under particular pressure.