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BASF dials up cost cuts in Germany, flags earnings rebound
Global Banking & Finance Review®
Company
By Ludwig Burger
FRANKFURT (Reuters) -Germany’s BASF will slash another 1 billion euros ($1.1 billion) in annual costs at its Ludwigshafen headquarters, citing weak demand and high energy costs in its home market, highlighting the country’s economic woes.
The annual cost savings will be reached by the end of 2026 affecting both production and administrative activities, the German chemicals giant said in a statement on Friday.
It also predicted that group earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for one-offs would rebound to between 8 billion and 8.6 billion euros in 2024. Last year, the earnings figure fell 29% to 7.67 billion.
CEO Martin Brudermueller, who will quit in April to become non-executive chairman of carmaker Mercedes-Benz, cited high competitiveness of the group outside of Germany under challenging conditions.
“On the other hand, the negative earnings at our Ludwigshafen site show the urgent need for further decisive actions here to enhance our competitiveness,” he added.
An economic downcycle at home is weighing on volumes affecting specialty chemicals and more basic petrochemicals known as its upstream business, the company said. This would lead to more job cuts that are being discussed with shop stewards.
“Higher production costs due to structurally higher energy prices predominantly burden the upstream businesses.”
A year ago, BASF laid out detailed plans to close sites, slash costs and about 2,600 jobs in Europe amid structurally weak demand there, affecting mainly its Ludwigshafen headquarters.
In October, the company ramped up cost cuts further to around 1.1 billion euros annually from the end of 2026, having previously targeted a 1 billion euro reduction.
It will propose an annual dividend of 3.40 euros per share, unchanged from a year earlier, it said on Friday.
($1 = 0.9240 euros)
(Reporting by Ludwig Burger; editing by Bartosz Dabrowski)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's operating performance and profitability.
Cost cuts refer to measures taken by a company to reduce its expenses. This can include layoffs, reducing operational costs, or closing facilities to improve profitability.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends can be issued in cash or additional shares.
An economic downturn is a period when the economy experiences a decline in activity, often characterized by reduced consumer spending, lower production, and increased unemployment.
Job cuts refer to the reduction of employees in a company, often due to financial constraints or restructuring efforts aimed at improving efficiency and profitability.
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