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BASF: Wintershall Dea's withdrawal from Russia results in billions in losses for the group


The withdrawal of the oil production subsidiary Wintershall is costing the BASF group dearly. But the failed Russia adventure is not the only problem that tweaks the Ludwigshafener.

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Wintershall gas field in Siberia: De facto economically expropriated

Photo: epa / dpa

With its withdrawal from Russia, the BASF subsidiary Wintershall Dea is making its parent company lose billions in 2022.

The bottom line at BASF was a deficit of around 1.4 billion euros, as the Dax group surprisingly announced on Tuesday evening after the stock exchange closed in Ludwigshafen.

The main reason was write-downs on Wintershall Dea in the amount of 7.3 billion euros.

The subsidiary complains about the factual expropriation of its holdings there in Russia.

According to the information, she is planning a complete withdrawal from the country in compliance with the legal provisions.

In retrospect, the barter deal concluded in 2015 with the Russian Gazprom group proves to be a miscalculation.

At that time, BASF had sold the gas trading and storage business to the Russian partner and in return received rights to oil and gas production in Siberia.

Both companies had initially stopped the exchange because of tensions between Europe and Russia over the Ukraine conflict, although the EU Commission had already approved the transaction.

According to the stock exchange announcement, the BASF share lost significantly in value after the close of trading, but almost made up for the losses in early Wednesday trading.

A trader was initially a little surprised by the pre-market price slide, because the high depreciation was actually an open secret.

In addition to the recent strong price development, some market participants may now fear a dividend cut.

Analyst Georgina Fraser from Goldman Sachs does not expect the billions lost to affect the dividend.

The free cash inflows are typically decisive for the distributions at BASF.

"Continuing our business in Russia is not sustainable," said Wintershall Dea boss Mario Mehren, according to a separate statement on Tuesday evening.

The war of aggression in Ukraine destroyed cooperation between Russia and Europe.

SPIEGEL and ZDF reported in early November that a Wintershall Dea joint venture had supplied gas condensate to Gazprom.

Since the Russian attack on Ukraine, the Russian state-owned company has been supplying aviation fuel to those bases whose pilots are suspected of being responsible for war crimes in the war.

In addition, according to Mehren, the Russian government has drastically restricted the activities of Western companies in the country.

"The joint ventures were de facto economically expropriated," said Mehren.

The manager referred to Russian regulations from the end of December.

These retrospectively reduced the prices at which the joint ventures can sell the hydrocarbons they produce to the Russian company Gazprom.

In the future, Wintershall Dea no longer wants to show the key figures of its Russian joint ventures in the consolidated financial statements.

Excluded are changes in the fair value of financial assets, it said.

At the level of the parent company BASF, depreciation on Wintershall Dea totaled 5.4 billion euros in the fourth quarter alone.

The group also made value adjustments on the company's European gas transport business and completely wrote off its stake in the pipeline company Nord Stream AG.

Sluggish day-to-day business

Day-to-day business was also rather gloomy for BASF.

Thanks to currency effects and higher prices, sales in the past year rose by eleven percent to 87.3 billion euros and thus reached the range targeted by the Management Board.

Before special items and before interest and taxes, BASF earned just under 6.9 billion euros, a good eleven percent less than in the previous year and thus fell only slightly short of the analysts' expectations.

According to the information, financial experts had not expected a net loss.

In 2021, BASF had earned around 5.5 billion euros.

However, burdens as a result of the Russian war of aggression in Ukraine and the resulting sharp rise in energy prices, especially in Europe, had already become apparent.

The top management around CEO Martin Bruderm├╝ller had therefore already announced an austerity program.

On February 24, BASF intends to present its complete balance sheet for the past year.


Source: spiegel

All business articles on 2023-01-18

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