BASF with job cuts and the closure of some production plants: boss Martin Brudermüller describes the crisis in Europe

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BASF boss Martin Brudermüller: "We're going through with it now"

Photo: Uwe Anspach / dpa

BASF boss

(61) gave everything to spread a good mood at the company's balance sheet press conference on Friday in Ludwigshafen.

The CEO spoke several times of "pride" in the workforce in these difficult times.

He spent a lot of time explaining the green transformation of the world's largest chemical company.

He invoked the difficult market conditions and fierce competition with regions outside of Europe in which his company, suffering from high energy prices, currently finds itself.

And he pictured a good future for the more than 100-year-old headquarters: "Ludwigshafen will remain the largest and most strongly integrated location in the BASF Group."

With his eloquently expressed optimism, Brudermüller had to classify negative news that is currently affecting the company intensively: The chemical company wants to close plants and cut jobs.

The austerity program falls victim to 2,600 jobs worldwide, almost two-thirds of them in Germany.

In addition, BASF is closing several energy-intensive plants, including those for the Perlon precursor caprolactam, one of the two ammonia plants and the associated fertilizer production.

Production at the ammonia plants had already been scaled back because they require large quantities of natural gas.

Production in the plant for the plastic precursor TDI, which only went into operation in 2015 but was not running at full capacity, is also to be ended.

Replacement should now come from locations abroad.

Around 700 more jobs in production will be affected by the cuts.

Layoffs are a first for BASF

In gross terms, the planned job cuts are even larger, with 4,200 jobs to be cut.

But BASF also wants to create jobs, for example in service centers in Berlin and Madrid.

Part of the job cuts should therefore be cushioned by natural fluctuation: From 2024 onwards, BASF expects 1,000 employees to leave due to age every year in the next ten years.

The savings program will cost around 400 million euros.

In total, BASF employs around 111,000 people worldwide, almost 52,000 of them in Germany.

Job cuts are a novelty for the BASF workforce.

And the appeasement measures taken by top management only partially caught on with the workforce.

So far, there has hardly ever been any public dissent between the workforce and management at BASF.

Those days are over.

The works council and the IGBCE union held their own press conference in the early afternoon.

The tone: combative.

"Job cuts are not yet a concept for future success"

, IGBCE chairman and BASF supervisory board member

.

"This location is on the verge of a turning point of its own. And we are only shaping it with courageous innovations and investments - not with the cost hammer."

The current energy price crisis must not develop into a permanent locational disadvantage.

The IGBCE chairman added: "Ludwigshafen now needs a concrete roadmap for tomorrow's sustainable chemical production, in which more will be invested. The Executive Board has failed to provide this investment roadmap to this day."

Although BASF wants to retain most of its employees through internal transfers or further qualifications, the internal shock is great.

That was also admitted in the morning by Brudermüller's colleague on the board,

(54).

She is responsible for the technology department and the Ludwigshafen plant on the Management Board.

Maas-Brunner reported that before the balance sheet was presented, all employees were informed in a global call.

We had previously spoken to the colleagues directly affected.

There were also "infinitely much" discussions with the employee representatives.

Nevertheless, there is "anger" and "disappointment", "unrest" has remained.

Both top managers objected to the idea, and the lights went out in Ludwigshafen.

Maas-Brunner emphasized that BASF invests two billion euros a year at its headquarters.

The planned electrification of the site as part of the green transformation will also create new job prospects.

"Huge problems in Germany"

But the global chemical champion cannot free himself from the worsening economic conditions in Europe.

You are in an "extremely difficult time," said Brudermüller, "as BASF and in Europe." From the end of 2024, the cost-cutting program should reduce spending by 500 million euros. The shutdowns should bring another 200 million euros.

As one has come to expect from him, Brudermüller did not skimp on assessments of the situation in Europe in the global competition between locations.

"The competitiveness of the European region is increasingly suffering from over-regulation," criticized Brudermüller.

In addition, there would be slow and bureaucratic approvals and high costs.

All of this has slowed down market growth in Europe compared to other regions for many years.

"In addition, the high energy prices are now weighing on profitability and competitiveness in Europe."

The Germans would have to rethink in order to secure the future of Germany as a business location.

You now have "huge problems in Germany."

Because "we were doing well", a lot was hidden.

He doesn't know "whether society as a whole is willing to adapt to the new times."

At BASF, however, they are "not in a panic".

In the future, Ludwigshafen should concentrate on supplying the European market.

Brudermüller wants to develop Ludwigshafen into "Europe's leading low-emission chemical location", including with heat pumps and low-CO2 methods of steam generation.

3.2 billion euros additional costs for energy - despite the savings measures

In 2022, BASF spent 3.2 billion euros more on energy costs than in the previous year, explained CFO Hans-Ulrich Engel.

For natural gas alone, 2.2 billion euros more were paid.

Ludwigshafen accounted for EUR 1.4 billion of the additional costs for natural gas, although BASF used a good third less gas.

The environment for the Group will remain difficult this year as well.

BASF expects sales of 84 billion to 87 billion euros after 87 billion in the previous year.

The group expects the adjusted operating result to be between 4.8 billion and 5.4 billion euros – that would be up to 30 percent less than in the previous year.

BASF expects a weak first half of 2023. The situation should improve in the second half of the year with catch-up effects, especially in China.

In Russia, BASF has already had painful experiences: in 2022, a group loss of 627 million euros was incurred due to billions in write-downs on the oil and gas subsidiary Wintershall Dea.

The BASF subsidiary complains that its holdings in Russia have been expropriated and is planning a complete withdrawal from the country.

Dividend to remain stable, but share under pressure

Despite a loss in the 2022 financial year, BASF intends to pay out the same amount of money to shareholders as it did in 2021. A dividend of EUR 3.40 per share is planned.

In the meantime, BASF has prematurely stopped an ongoing share buyback program.

Instead of up to three billion euros, 1.4 billion euros were spent.

This keeps the company more cash in the till for tough times.

On the stock exchange, BASF shares fell by more than 7 percent at times on Friday, bringing up the rear in the Dax.

Brudermüller continues to expand business in China – despite criticism from the board.

This week,

(52) left the company well before the end of their contract.

The board member was considered a critic of too much dependence on China.

Brudermüller commented in detail on the internally disputed expansion into China.

From the CEO's point of view, the opportunities outweigh the risks, but he is not blind to geopolitical risks.

Is there a "risk of disaster" if China attacks Taiwan? asks Brudermüller.

"It does exist."

In this case, the "total loss" of the China business is conceivable.

But then there would be no stone left unturned in the world economy anyway.

BASF has been investing billions in the construction of the new Verbund site in Zhanjiang since 2018.

"We're doing this now."

Conversion in Ludwigshafen without the foreign business "cannot be financed"

BASF is therefore "not without a fatherland".

They want to invest in Europe, but there must also be a corresponding market need.

China is the most promising market: "We have to invest where we can get the appropriate return for our shareholders."

Without the investments outside of Europe, the transformation at the Ludwigshafen site could not be financed.

The BASF boss notes that he is fundamentally an optimist – and when asked, he also briefly looks at the future of BASF after his departure.

Brudermüller's contract ends in spring 2024. He hopes then "to be able to hand over the baton in calmer waters."

The path taken to climate neutrality by 2045 should be "irreversible" by then.

With news agencies