CHEMICALS giant BASF on Friday (Feb 23) unveiled a cost-cutting plan worth one billion euros (S$1.5 billion) for its German headquarters, including job losses, as it struggles with slumping demand and high energy costs.
The package of savings for the Ludwigshafen site through 2026, which comes on top of existing cost-cutting measures for the whole group, will target “both production as well as non-production areas”, BASF said in a statement.
This will “unfortunately lead to further job cuts”, said chief executive Martin Brudermueller.
“The details are currently being worked out,” BASF said, adding that employee representatives “will be closely involved in this process going forward”.
The company also plans to “update the longer-term positioning of the Ludwigshafen site” to reflect “the changed market realities in Europe and Germany”, it said.
BASF’s Ludwigshafen base, the largest chemical complex in the world, is suffering from “weak demand” and “higher production costs due to structurally higher energy prices”, the company said.
Like other companies in energy-intensive sectors, BASF has been hit hard by surging energy costs in the wake of Russia’s invasion of Ukraine in 2022.
An industrial slowdown in Germany, Europe’s biggest economy, and weaker foreign demand have added to the group’s woes.
BASF announced in October that it would step up a major cost-cutting drive, particularly in Europe, and reduce investments over the coming years in an attempt to improve profitability.
New CEO Markus Kamieth will take over from Martin Brudermueller in April.
BASF confirmed worse-than-expected 2023 earnings on Friday, as the cost-cutting efforts failed to compensate for a slump in sales.
Net profit came in at 225 million euros in 2023, well below analyst forecasts of 2.25 billion euros, and sales fell by 21.1 per cent, the group said.
For 2024, BASF is predicting pre-tax earnings of between eight billion and 8.6 billion euros, betting on improved global economic momentum later in the year.
However, the group also said it is expecting continued “unfavourable framework conditions for industrial value creation” in Europe. AFP
