Germany's BASF announces cost-saving plan, job cuts amid weak demand

German chemical and battery giant BASF is launching a cost-cutting plan due to weak demand in Europe.

Additional costs of €1 billion ($1.1 billion) are to be saved annually at the German site in Ludwigshaven by 2026, the company announced on Friday.

Fixed costs are to be reduced by increasing efficiency and production capacities are to be adapted to market requirements.

"The program will therefore also unfortunately lead to further job cuts," said chief executive Martin Brudermüller.

Details are currently being worked out and employee representatives are closely involved in the further process, he added.

BASF's management already announced a cost-cutting programme in 2022 due to deteriorating business and more difficult conditions in Europe, particularly as a result of the sharp rise in gas prices.

The programme aims to reduce annual costs by a total of €1.1 billion by the end of 2026. In addition, BASF is taking further measures to reduce annual costs by €500 million from the end of 2026.

The measures already include job cuts and the closure of several chemical plants.

BASF on Friday reported a return to profit in fiscal year 2023, with a net income of €225 million, compared to a loss of €627 million in 2022.

Income from operations (EBIT) before special items in the 2023 business year amounted to €3.8 billion.

The decline of €3.1 billion compared with the prior-year figure was primarily due to a considerably lower earnings contribution from the Chemicals and Materials segments.

EBIT was €2.2 billion in 2023; the steep decline compared with the prior-year figure resulted primarily from special items amounting to minus €1.6 billion.

Annual sales declined to €68.9 billion from €87.3 billion in the previous year, hurt by considerably lower prices and volumes.

Lower raw materials prices in particular led to lower prices in almost all segments.

Sales volumes fell in all segments as a result of weak demand from many customer industries.

The company said its board will propose a dividend of €3.40 per share, equal to the prior-year level, to the Annual Shareholders' Meeting.

BASF expects the weakness in global economic momentum from 2023 to continue in 2024.

EBITDA before special items for 2024 is expected to rise to between €8.0 billion and €8.6 billion in 2024 compared to €7.7 billion in 2023.