More cuts to come at Ludwigshafen

In its annual results presentation, BASF announced plans to reduce costs at its main verbund site in Ludwigshafen by a further €1 billion/year by the end of 2026. This comes on top of a similar scale of cuts initiated in late 2022.

Last year, results in Germany suffered due to substantially negative earnings at Ludwigshafen, the company said. This was attributed to two main causes: the temporary low-demand environment is affecting volume development both upstream and downstream, while structurally high energy prices are raising production costs upstream.

The cost reduction programme will target production and non-production areas. BASF will seek to adapt production capacities to market needs and significantly trim variable costs by redesigning processes. It will also endeavour to improve utilisation rates, which are “considerably below normal levels”. There will be an as yet unspecified number of job cuts.

The board expects to present a target picture in 2H 2024, based on the regulatory framework and the changed market realities in Europe and Germany. Board chairman Martin Brudermüller said: “The board team will remain strongly committed to the Ludwigshafen site. We want to develop Ludwigshafen into the leading low-CO2-emission chemical production site with high profitability and sustainability.”

BASF saw sales fall from €87.3 billion to €68.9 billion in the 2023 business year, mainly driven by considerably lower prices and volumes. Sales volumes fell in all segments as a result of weak demand. However, it managed to increase cash flows from operating activities by 5.2% to €8.1 billion.

EBIT before special items fell from €6.9 billion in 2022 to €3.8 billion, primarily due to a considerably lower earnings contribution from the Chemicals and Materials segments. Only the Agricultural Solutions business really bucked this trend. The company also saw a big fall in EBIT to €2.2 billion because of various impairments on property, plant and equipment and on tangible and intangible assets.