Lower prices, volume drive down results for BASF

Lower prices and volumes drove a 21 percent drop in sales in 2023 at BASF SE, falling to 68.9 billion euros ($74.6 bilion) from 87.3 billion euros ($94.5 billion) in 2022.

A fall in raw material prices, in particular, led to lower prices in most of its business segments, the company said, with weak demand in many customer industries leading to a drop in sales volumes in all segments.

Earnings before interest, taxes, depreciation and amortization (EBITDA) before special items for the year fell by 28 percent, from 10.7 billion euros (11.6 billion) in 2022 to 7.7 billion euros ($8.3 billion) in 2023. Lower earnings contributions from the chemicals and materials segments were a significant driver in the declining earnings, the company said. Reduced margins and volumes both had an impact.

BASF said in an extremely difficult market with low demand, EBIT before special items fell by double-digit percentages in all regions.

"In absolute terms, however, our teams delivered a positive earnings contribution in all significant countries, with the exception of Germany," said Chairman Martin Brudermüller.

The German results were hit by "substantially negative earnings" in Ludwigshafen, its largest production site, with low demand affecting volumes in both upstream and downstream businesses. High energy prices also hit upstream businesses.

"On the one hand, this situation demonstrates the high competitiveness and health of BASF Group under challenging conditions at the global level," Brüdermuller said. "On the other hand, the negative earnings at our Ludwigshafen site show the urgent need for further decisive actions here to enhance our competitiveness."

In February 2023, BASF announced it was closing its TDI feedstock plant in Ludwigshafen.

In addition to ongoing cost-cutting measures, further reductions of 1 billion euros ($1.08 billion) per year are planned for Ludwigshafen. Cost savings will be made in both production and non-production areas, with fixed costs cut by driving efficiency in company structures and adapting production capacities to market needs. Variable costs will be reduced by redesigning processes. There will be further job cuts, the details of which are being worked out.

"The board team will remain strongly committed to the Ludwigshafen site," Brudermüller said. "We want to develop Ludwigshafen into the leading low CO2-emission chemical production site with high profitability and sustainability. We will focus Ludwigshafen on supplying the European market to remain the partner of choice for our customers.

"To achieve this, it is essential that we implement the program consistently and as quickly as possible. At the same time, we are systematically driving forward our business in those regions of the world that are growing more dynamically and offer attractive conditions for investments," he added

Looking to 2024, the company does not expect global economic growth to accelerate until later in the year. Global chemical production is expected to grow faster in 2024, driven primarily by the Chinese chemical industry, it said. It is projecting an increase in EBITDA before special items to between 8 billion euros ($8.6 billion) and 8.6 billion euros ($9.3 billion).

In October, BASF announced it was selling its polypropylene foam business.