Admin l Friday, February 24, 2023
German chemical giant BASF plans to cut 2,600 jobs as it reported a loss for the fourth quarter, the company said on Friday. The loss in the fourth quarter is compared to a profit in the prior year, hurt by impairments on the shareholding in Wintershall Dea.
The company announced concrete cost savings measures focused on Europe as well as measures to adapt the production structures at the Verbund site in Ludwigshafen.
Looking ahead for 2023, BASF expects sales to be between €84 billion ($89 billion) and €87 billion. Group earnings before interest and taxes (EBIT) before special items is expected to decline to between €4.8 billion and €5.4 billion.
The company expects a weak first half of 2023 followed by an improved earnings environment in the second half of the year due to recovery effects, especially in China.
At the Annual Shareholders’ Meeting, the company will propose a dividend of €3.40 per share, equal to the prior-year dividend.
BASF’s fourth-quarter net loss €4.8 billion compared to a profit of €898 million in the prior year. The significant decline was due to special charges of around €6.3 billion in 2022, mainly from non-cash-effective impairment losses on the shareholding in Wintershall Dea AG.
It was especially due to the deconsolidation of Wintershall Dea’s Russian exploration and production activities, which subsequently resulted in a revaluation of Wintershall Dea’s Russian shareholdings. Fourth-quarter EBIT before special items fell by 69.6% to €373 million compared with the prior-year quarter.
Group sales for the fourth quarter decreased 2.3% to €19.3 billion, mainly on account of lower volumes.
The company said that cost savings program, which will be implemented in 2023 and 2024, focuses on rightsizing the company’s cost structures in Europe, and particularly in Germany, to reflect the changed framework conditions.
“Globally, the measures are expected to have a net effect on around 2,600 positions; this figure includes the creation of new positions, in particular in hubs,” the company said.
On completion, the program is expected to generate annual cost savings of more than €500 million by the end of 2024. In addition, BASF said it is implementing structural measures to make the Ludwigshafen site better equipped for the intensifying competition in the long term.
The adaptations to the Verbund structures in Ludwigshafen are expected to lower fixed costs by over €200 million annually by the end of 2026.