02.23.24
In a market environment shaped by economic uncertainty, BASF Group reported sales of €68.9 billion in the 2023 business year, compared with €87.3 billion in the previous year. This sales development was mainly driven 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.
Nevertheless, BASF demonstrated economic strength with cash flows from operating activities rising 5.2% year on year to reach €8.1 billion. The company had already released preliminary figures for the full year 2023 on Jan. 19, 2024.
Dr. Martin Brudermüller, chairman of the Board of Executive Directors of BASF, and Dr. Dirk Elvermann, CFO, presented the 2023 business development in detail and announced a further program for the Ludwigshafen site with additional annual cost savings of €1 billion by the end of 2026. This is in addition to the existing cost savings program in non-production units with a focus on Europe and the adaptation of production structures in Ludwigshafen.
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 before special items decreased in the Chemicals segment, primarily due to reduced margins and volumes, as well as lower contributions from shareholdings accounted for using the equity method. Earnings declined in the Materials segment, largely as a result of lower polyamide and ammonia margins.
The slight earnings growth in the Surface Technologies segment was attributable to the considerably higher EBIT before special items in the Coatings division due to price and volume increases, which more than compensated for the significant decline in earnings of the Catalysts division.
BASF reported EBIT of €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. Special expenses resulted in particular from impairments totaling around €1.1 billion. These comprised impairments on property, plant and equipment in the Surface Technologies and Agricultural Solutions segments and on tangible and intangible assets in the Materials segment.
EBITDA before special items in 2023 was €7.7 billion, €3.1 billion below the 2022 figure. EBITDA decreased by €3.6 billion to €7.2 billion. Net income increased by €852 million to €225 million, compared with minus €627 million in 2022.
Cash flows from operating activities amounted to €8.1 billion for the full year 2023, compared with €7.7 billion in the previous year. This improvement was primarily due to cash inflow from net working capital. Free cash flow, which remains after deducting payments made for property, plant and equipment and intangible assets from cash flows from operating activities, amounted to €2.7 billion in 2023 following €3.3 billion in the previous year.
Net debt of €16.6 billion as of Dec. 31, 2023, was almost on a level with the figure of €16.3 billion at the prior year-end. The equity ratio of 47.3% at the end of 2023 nearly matched the figure of 48.4% as of Dec. 31, 2022.
“The very solid equity ratio and strong cash performance are proof of BASF’s continued financial strength, even in challenging times,” said Elvermann.
A dividend of €3.40 per share, equal to the prior-year level, will be proposed to the Annual Shareholders’ Meeting, representing a payment of €3.0 billion to shareholders of BASF SE. With this proposed dividend, the BASF share offers a high dividend yield of 7.0% based on the year-end share price for 2023. BASF is part of the DivDAX share index, which contains the 15 companies with the highest dividend yield in the DAX 40.
In 2023, in an extremely difficult market environment with low demand, EBIT before special items declined 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,” Brudermüller said.
Results in Germany suffered due to substantially negative earnings at the largest production site in Ludwigshafen. There are two main reasons for this: The temporary low-demand environment is affecting the volume development in both the upstream and downstream businesses. And higher production costs due to structurally higher energy prices predominantly burden the upstream businesses.
“On the one hand, this situation demonstrates the high competitiveness and health of BASF Group under challenging conditions at the global level,” Brudermüller added. “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 October 2022, BASF was one of the first chemical companies to initiate a significant cost savings program. And in February 2023, the company launched a set of concrete measures to save costs in non-production areas in Europe and to adapt production structures at the Ludwigshafen site.
As confirmed in BASF’s third quarter 2023 reporting, total annual cost savings from all the previously announced measures are expected to reach €1.1 billion by the end of 2026. An annual cost reduction run rate of around €600 million was already achieved by the end of 2023. The measures announced in October 2022 and February 2023 will achieve another €500 million in annual cost savings by the end of 2026.
With an additional cost savings program, it is planned to reduce costs at the Ludwigshafen site by a further €1 billion annually by the end of 2026. The program will generate cost savings in both production as well as non-production areas.
“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.”
BASF expects the weakness in global economic momentum from 2023 to continue in 2024. Global economic growth is only expected to accelerate somewhat later in the year, meaning that BASF expects the global economy to grow by 2.3% overall in 2024 (2023: plus 2.6%). In Europe, the comparatively high energy prices and unfavorable framework conditions for industrial value creation continue to slow down economic development.
BASF also assumes that global industrial production will likely expand by 2.2% overall (2023: plus 1.4%). Global chemical production is expected to grow faster in 2024, by 2.7% (2023: plus 1.7%). This will be driven primarily by the expected growth in the Chinese chemical industry. BASF’s planning assumes an average oil price of $80 for a barrel of Brent crude and an exchange rate of $1.10 per euro.
The BASF Group’s EBITDA before special items is expected to rise to between €8.0 billion and €8.6 billion in 2024 (2023: €7.7 billion). BASF forecasts the free cash flow of the BASF Group will be between €0.1 billion and €0.6 billion (2023: €2.7 billion). This is based on expected cash flows from operating activities of between €6.6 billion and €7.1 billion, minus expected payments made for property, plant and equipment and intangible assets in the amount of €6.5 billion. The high investment-related cash outflow is mainly due to investments in the new Verbund site in China, which will reach their absolute peak in 2024 and then decline in the following years.
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.
Nevertheless, BASF demonstrated economic strength with cash flows from operating activities rising 5.2% year on year to reach €8.1 billion. The company had already released preliminary figures for the full year 2023 on Jan. 19, 2024.
Dr. Martin Brudermüller, chairman of the Board of Executive Directors of BASF, and Dr. Dirk Elvermann, CFO, presented the 2023 business development in detail and announced a further program for the Ludwigshafen site with additional annual cost savings of €1 billion by the end of 2026. This is in addition to the existing cost savings program in non-production units with a focus on Europe and the adaptation of production structures in Ludwigshafen.
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 before special items decreased in the Chemicals segment, primarily due to reduced margins and volumes, as well as lower contributions from shareholdings accounted for using the equity method. Earnings declined in the Materials segment, largely as a result of lower polyamide and ammonia margins.
The slight earnings growth in the Surface Technologies segment was attributable to the considerably higher EBIT before special items in the Coatings division due to price and volume increases, which more than compensated for the significant decline in earnings of the Catalysts division.
BASF reported EBIT of €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. Special expenses resulted in particular from impairments totaling around €1.1 billion. These comprised impairments on property, plant and equipment in the Surface Technologies and Agricultural Solutions segments and on tangible and intangible assets in the Materials segment.
EBITDA before special items in 2023 was €7.7 billion, €3.1 billion below the 2022 figure. EBITDA decreased by €3.6 billion to €7.2 billion. Net income increased by €852 million to €225 million, compared with minus €627 million in 2022.
Cash flows from operating activities amounted to €8.1 billion for the full year 2023, compared with €7.7 billion in the previous year. This improvement was primarily due to cash inflow from net working capital. Free cash flow, which remains after deducting payments made for property, plant and equipment and intangible assets from cash flows from operating activities, amounted to €2.7 billion in 2023 following €3.3 billion in the previous year.
Net debt of €16.6 billion as of Dec. 31, 2023, was almost on a level with the figure of €16.3 billion at the prior year-end. The equity ratio of 47.3% at the end of 2023 nearly matched the figure of 48.4% as of Dec. 31, 2022.
“The very solid equity ratio and strong cash performance are proof of BASF’s continued financial strength, even in challenging times,” said Elvermann.
A dividend of €3.40 per share, equal to the prior-year level, will be proposed to the Annual Shareholders’ Meeting, representing a payment of €3.0 billion to shareholders of BASF SE. With this proposed dividend, the BASF share offers a high dividend yield of 7.0% based on the year-end share price for 2023. BASF is part of the DivDAX share index, which contains the 15 companies with the highest dividend yield in the DAX 40.
In 2023, in an extremely difficult market environment with low demand, EBIT before special items declined 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,” Brudermüller said.
Results in Germany suffered due to substantially negative earnings at the largest production site in Ludwigshafen. There are two main reasons for this: The temporary low-demand environment is affecting the volume development in both the upstream and downstream businesses. And higher production costs due to structurally higher energy prices predominantly burden the upstream businesses.
“On the one hand, this situation demonstrates the high competitiveness and health of BASF Group under challenging conditions at the global level,” Brudermüller added. “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 October 2022, BASF was one of the first chemical companies to initiate a significant cost savings program. And in February 2023, the company launched a set of concrete measures to save costs in non-production areas in Europe and to adapt production structures at the Ludwigshafen site.
As confirmed in BASF’s third quarter 2023 reporting, total annual cost savings from all the previously announced measures are expected to reach €1.1 billion by the end of 2026. An annual cost reduction run rate of around €600 million was already achieved by the end of 2023. The measures announced in October 2022 and February 2023 will achieve another €500 million in annual cost savings by the end of 2026.
With an additional cost savings program, it is planned to reduce costs at the Ludwigshafen site by a further €1 billion annually by the end of 2026. The program will generate cost savings in both production as well as non-production areas.
“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.”
BASF expects the weakness in global economic momentum from 2023 to continue in 2024. Global economic growth is only expected to accelerate somewhat later in the year, meaning that BASF expects the global economy to grow by 2.3% overall in 2024 (2023: plus 2.6%). In Europe, the comparatively high energy prices and unfavorable framework conditions for industrial value creation continue to slow down economic development.
BASF also assumes that global industrial production will likely expand by 2.2% overall (2023: plus 1.4%). Global chemical production is expected to grow faster in 2024, by 2.7% (2023: plus 1.7%). This will be driven primarily by the expected growth in the Chinese chemical industry. BASF’s planning assumes an average oil price of $80 for a barrel of Brent crude and an exchange rate of $1.10 per euro.
The BASF Group’s EBITDA before special items is expected to rise to between €8.0 billion and €8.6 billion in 2024 (2023: €7.7 billion). BASF forecasts the free cash flow of the BASF Group will be between €0.1 billion and €0.6 billion (2023: €2.7 billion). This is based on expected cash flows from operating activities of between €6.6 billion and €7.1 billion, minus expected payments made for property, plant and equipment and intangible assets in the amount of €6.5 billion. The high investment-related cash outflow is mainly due to investments in the new Verbund site in China, which will reach their absolute peak in 2024 and then decline in the following years.
