BASF expects earnings to decline in 2023

The high uncertainties that characterized 2022 as a result of the war in Ukraine, high raw material and energy costs in Europe, rising prices and interest rates, inflation and the development of the coronavirus pandemic will continue in 2023 and weigh on global demand. BASF therefore expects sales of between €84 billion and €87 billion for the current year. The BASF Group's EBIT before special items is expected to decline to between €4.8 billion and €5.4 billion. BASF anticipates a weak first half of 2023. The company expects an improved earnings situation in the second half of 2023 due to catch-up effects, particularly in China.

Last year, BASF increased its sales by 11.1 percent to 87.3 billion euros. Higher prices in almost all segments as a result of increased raw material and energy prices were the main reason for the sales growth. However, significantly lower sales volumes overall dampened the BASF Group's sales growth. At EUR 6.9 billion, income from operations (EBIT) before special items was 11.5 percent below the previous year's figure, but within the forecast corridor.

In 2022, the BASF Group's operating result was impacted by additional energy costs of €3.2 billion worldwide compared to the previous year. Around 84 percent of this increase was attributable to Europe, with the Ludwigshafen Verbund site being particularly affected. The increased costs for natural gas accounted for 69 percent of the total increase in energy costs worldwide.

Last year, a loss of 627 million euros was also incurred due to billions in write-downs on the subsidiary Wintershall Dea. A year earlier, BASF had still earned around 5.5 billion euros.

Cash flow of the BASF Group

In the 2022 financial year, cash flow from operating activities amounted to EUR 7.7 billion after EUR 7.2 billion in the previous year. Free cash flow amounted to EUR 3.3 billion in 2022 after EUR 3.7 billion in the previous year. The Board of Executive Directors and Supervisory Board will propose a dividend of EUR3.40 per share at this year's Annual Shareholders' Meeting, in line with the previous year. Based on the year-end share price, this results in a high dividend yield of 7.3 percent. In total, BASF will distribute 3.0 billion euros to its shareholders.

Cost-saving measures in Europe

As part of his presentation, Martin Brudermüller also introduced measures from the cost-saving program with a focus on Europe and the adjustment of production structures at the Verbund site in Ludwigshafen. "The competitiveness of the European region is increasingly suffering from overregulation. It is also suffering more and more from slow and bureaucratic approval procedures and, above all, from high costs for most production factors," said Brudermüller. "All of this has already slowed down market growth in Europe compared to other regions for many years. In addition, high energy prices are now weighing on profitability and competitiveness in Europe."

The cost savings program, which will be implemented in 2023 and 2024, aims to adapt BASF's cost structures in Europe and especially in Germany to the changed framework conditions. Once the program is completed, BASF expects to achieve annual cost savings of more than €500 million in units outside production, i.e. in corporate and service units, in research and development (R&D) and at Group headquarters. Around half of these savings are expected at the Ludwigshafen site.

The measures in this program include bundling services in hubs, simplifying structures in the management of business units, tailoring business services to requirements and increasing the efficiency of R&D activities. On balance, the measures are expected to affect around 2,600 jobs worldwide; this figure includes new jobs to be created, primarily in the hubs.