BASF Slips To Loss In Q4; To Cut 2,600 Jobs

BASF (BFA.L,BASFY.PK) reported a loss in the fourth-quarter compared to a profit in the prior year, hurt by impairments on the shareholding in Wintershall Dea. The German chemicals major will cut 2,600 jobs, as part of cost savings program. The company announced concrete cost savings measures focused on Europe as well as measures to adapt the production structures at the Verbund site in Ludwigshafen.

Looking ahead for 2023, BASF expects sales to be between 84 billion euros and 87 billion euros. Group EBIT before special items is expected to decline to between 4.8 billion euros and 5.4 billion euros.

The company expects a weak first half of 2023 followed by an improved earnings environment in the second half of the year due to recovery effects, especially in China.

At the Annual Shareholders’ Meeting, the company will propose a dividend of 3.40 euros per share, equal to the prior-year dividend.

BASF’s fourth-quarter net loss 4.8 billion euros compared to a profit of 898 million euros in the prior year.

The significant decline was due to special charges of around 6.3 billion euros in 2022, mainly from non-cash-effective impairment losses on the shareholding in Wintershall Dea AG. It was especially due to the deconsolidation of Wintershall Dea’s Russian exploration and production activities, which subsequently resulted in a revaluation of Wintershall Dea’s Russian shareholdings.

Fourth-quarter EBIT before special items fell by 69.6 percent to 373 million euros compared with the prior-year quarter.

Group sales for the fourth quarter decreased 2.3 percent to 19.3 billion euros, mainly on account of lower volumes.

The company said that cost savings program, which will be implemented in 2023 and 2024, focuses on rightsizing the company’s cost structures in Europe, and particularly in Germany, to reflect the changed framework conditions.

“Globally, the measures are expected to have a net effect on around 2,600 positions; this figure includes the creation of new positions, in particular in hubs,” the company said.

On completion, the program is expected to generate annual cost savings of more than 500 million euros by the end of 2024.

In addition, BASF said it implementing structural measures to make the Ludwigshafen site better equipped for the intensifying competition in the long term.

The adaptations to the Verbund structures in Ludwigshafen are expected to lower fixed costs by over 200 million euros annually by the end of 2026.

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