LUDWIGSHAFEN (dpa-AFX) - Sales and earnings at chemical company BASF slumped in 2023 due to weak demand, especially in Europe. "In absolute figures, however, our teams made a positive contribution to earnings in all key countries - with the exception of Germany," said Martin Brudermüller in a statement on Friday. The result in Germany suffered from the clearly negative result at the largest production site in Ludwigshafen. It was therefore necessary to take further measures to improve competitiveness at the headquarters. The share price rose slightly shortly before the start of trading.

BASF therefore intends to save an additional one billion euros in costs at the Ludwigshafen site by 2026, as the company announced when presenting its final annual figures for 2023. Savings are to be made both in production and in external areas. Fixed costs are to be reduced by increasing efficiency and production capacities are to be adapted to market requirements. "Unfortunately, the program will therefore also involve further job cuts," Brudermüller announced. Details are currently being worked out.

BASF's management had already announced a cost-cutting program in 2022 due to deteriorating business and more difficult conditions in Europe, particularly as a result of the sharp rise in gas prices. The aim is to reduce annual costs by a total of 1.1 billion euros by the end of 2026. The measures also include job cuts and the closure of several chemical plants. Costs had already fallen by around 600 million euros by the end of 2023. The remaining 500 million euros in savings from the program are to be added from 2026, the company added.

BASF's Board of Executive Directors does not expect any significant improvement in the current year either. The weakness in global economic momentum from 2023 is likely to continue in 2024, the DAX-listed company added. Growth is only expected to pick up somewhat in the further course of the year. In Europe, comparatively high energy prices and unfavorable framework conditions will continue to slow down economic development. Global chemical production is expected to increase by 2.7 percent. This will be driven primarily by the expected growth in the Chinese chemical industry.

For the current year, BASF is targeting earnings before interest, taxes, depreciation and amortization (EBITDA) and special items of between 8.0 billion euros and 8.6 billion euros. In 2023, earnings fell by almost 29 percent to just under €7.7 billion. Free cash flow is expected to amount to between EUR 0.1 billion and EUR 0.6 billion, compared to EUR 2.7 billion in the previous year. BASF attributes the significant decline to investments in China. BASF is currently building a new Verbund site in southern China at a cost of around ten billion euros. BASF had already presented preliminary annual figures for 2023 in mid-January.

By removing several businesses from the Verbund system and transforming them into legally independent subsidiaries, BASF aims to make the chemical company more profitable again. "Ultimately, it's about improving performance, being closer to customers and competing even more fiercely," CFO Dirk Elvermann told the news agencies dpa-AFX and dpa. A growth business must be managed differently than a business that is essentially geared towards returns. BASF is achieving this with a new structure.

In 2023, as already announced, sales shrank by a fifth year-on-year to just under 69 billion euros. This was mainly due to significantly lower prices and volumes. Sales volumes fell in all segments as a result of weak demand from many customer industries, it was reported. The bottom line for shareholders was a profit of 225 million euros. In 2022, BASF reported a loss of 627 million euros due to multi-billion euro write-downs in connection with the Russian business. The BASF Board of Executive Directors intends to keep the dividend for 2023 constant at 3.40 euros.

In order to make the chemical company more profitable again, BASF announced in December that it would separate the agricultural chemicals, battery materials and coatings businesses from the Verbund system. These are to be transformed into legally independent subsidiaries. These areas are less closely linked to the rest of the Group. CEO Martin Brudermüller had rejected the idea of selling the divisions.

In December, BASF also announced the long-awaited sale of Wintershall Dea to the British oil company Harbour Energy, which is to be completed in the fourth quarter of 2024. The transaction excludes Wintershall Dea's Russian business and the stake in Wiga. The latter is active in the gas transportation business - the operationally independent Wiga subsidiaries operate high-pressure pipeline systems, including the transportation network of Gascade as well as Opal and NEL. BASF holds a good 70 percent of Wintershall Dea. The rest is owned by LetterOne, an investment company./mne/nas/stk