News

BASF sets out its strategy to 2020

BASF has outlined the way in which it is aiming to "strengthen its position as the world's leading chemical company" over the rest of the decade

GERMANY

Three senior members of the board of executive directors at BASF have outlined the way in which the company is aiming to "strengthen its position as the world's leading chemical company" over the rest of the decade. Profitable - mostly organic - growth, adding value, the verbund, innovation for sustainability and expansion in emerging markets are the keys to the strategy labelled 'We create chemistry'.

The company aims to increase its sales by 6%/year - as opposed to forecast growth in chemical production of 4%/year, which would itself be faster than forecast overall GDP growth - to 2020. It is thus targeting sales of about €115 billion by that year, when it also hopes to achieve an EBITDA of €23 billion, a figure that requires 7.5%/year growth. No specific targets for this year were given and analysts noted that all of these aims are "aspirational".

BASF will also further develop the "sophisticated and profitable" verbund system of integrated production at a few large sites, while generally "sharpening the focus" of this system on customer industries. It will continue to supply products and services to the vast range of industries it already supplies.

"The scope of skills and know-how that we combine under one roof is what sets us apart from our competitors. These factors include our innovative strength, our broad technology basis, our operational excellence and our global access to relevant customer industries," said board chairman Dr Kurt Bock. "We add value as one company by combining these strengths."

The board of directors presented the strategy update in Ludwigshafen at the end of Novmeber

Bock added that population growth is a key trend, bringing BASF and the wider chemicals industry both huge challenges and huge opportunities. Its future strategy will emphasise sustainable development, in terms of conserving resources, ensuring healthy food and nutrition and improving the quality of life. More substantially, by 2020 €30 billion in sales and €7 billion of EBITDA will be generated with products that have been on the market for less than ten years.

Vice chairman Dr Martin Brudermüller said that the company will "continue to develop our portfolio in the direction of customer-focused businesses", with innovation coming not so much from new chemicals as from new materials and systems that combine know-how from multiple disciplines. This will be driven above all by customer demands for sustainability, which will "be more strongly integrated into business decisions".

By 2020, BASF expects the emerging markets to continue growing from about 33% of sales to 45%, excluding the exclusively European-based Oil & Gas. Such markets will account for over one third of planned capital expenditures of €30-35 billion in that time frame. Strong growth is also planned for the water treatment activities, which are targeting sales of €800 million/year by 2020.

Finally, the company will implement a new 'strategic excellence programme', STEP, to reduce fixed costs, improve margins and increase production capacities. This is expected to contribute around €1 billion to earnings by the end of 2015. No job cuts are envisaged, at least for as long as overall growth aims are met. CFO Dr Hans-Ulrich Engel stressed the need to maintain BASF's credit rating and said that buying back shares was possible in principle.

Separately, BASF announced that it is forming a new Battery Materials global business unit with effect from 1 January 2012. The new unit brings together the cathode materials development activities of the Catalysts division, the electrolyte formulations of the Intermediates division and the next-generation lithium battery activities of BASF Future Business. Operational consolidation will take place throughout 1H

This business unit will be part of the Catalysts division and will be headed by Ralf Meixner, currently vice president of business management for industrial petrochemicals in Europe. BASF said that creating it recognises the "significant growth opportunity associated with the global battery marketplace" and will enable it to "leverage our resources and expertise in a unified and focused manner". The company claims to be the world's leading chemical provider to the global automotive industry.

 

 

From Online Issue: December 2011