Rising energy costs are cutting a deep swath in BASF’s balance sheet. Profit collapses in the summer quarter – when presenting the figures, CEO Brudermüller announces that the planned savings program will be implemented as quickly as possible. This will primarily affect the home location in Ludwigshafen.
The largest chemical company in the world, BASF, wants to cut costs quickly after a slump in profits in the third quarter. BASF must “adapt the cost structures as quickly as possible and permanently,” affirmed CEO Martin Brudermüller in the morning. The reason is the deteriorating earnings development in Europe and Germany and the rising energy prices. “As a company, we have to act now,” he emphasized.
BASF had already published the savings program in mid-October together with preliminary figures for the third quarter. Once implemented, it should bring annual savings of around 500 million euros. However, the management has not yet given any figures for an expected reduction in jobs.
The gas crisis and the stake in the oil and gas group Wintershall Dea caused BASF high depreciation in the third quarter. After-tax profit fell to 909 million euros from 1.25 billion a year ago due to impairments of around 740 million euros. Adjusted operating profit (EBIT) at BASF collapsed by almost 28 percent to 1.3 billion euros. Sales, on the other hand, rose by twelve percent to 21.9 billion euros, also thanks to price increases.
Despite the deteriorating economic environment, BASF confirmed its forecast for this year, which Brudermüller had raised at the end of July. Accordingly, the Ludwigshafen-based group continues to expect sales of 86 to 89 billion euros and an adjusted operating result of 6.8 to 7.2 billion euros.
Brudermüller now wants to put the brakes on costs and is thus reacting to rising energy prices. According to the group, in the first nine months of 2022 the additional costs for natural gas at the European BASF sites amounted to around 2.2 billion euros compared to the previous year. In view of the deteriorating framework conditions, Europe and Germany in particular should be the focus of the austerity program.
The company had already announced that BASF intends to achieve more than half of the cost savings at the Ludwigshafen site. The company employs around 39,000 of its 110,700 employees there. According to the current site agreement, operational layoffs are excluded until the end of 2025.
BASF had announced talks with employee representatives. “We will monitor the process critically,” said Sinischa Horvat, head of the works council. “If jobs are lost, the corresponding work must also be done. This must not be spread over more shoulders.”
In the most recent austerity program, which ran until the end of 2021, BASF cut more than 6,000 jobs worldwide. But the current conversion should not remain the last austerity program at BASF. The Management Board is also working on measures for the medium and long-term structural adjustment of the production network in Europe, which are to be announced in the first quarter of next year.
