- Sales: 87.3 billion euros (plus 11.1 percent)
- EBIT before special items: 6.9 billion euros (minus 11.5 percent)
- Cash flow from operating activities: 7.7 billion euros (up 6.4 percent); Free cash flow: 3.3 billion euros (minus 10.2 percent)
- Proposed dividend of EUR 3.40 per share for the 2022 financial year (2021: EUR 3.40 per share)
- Concrete measures to save costs in Europe and to adapt the Verbund structures in Ludwigshafen were presented
Outlook 2023:
- Sales forecast between EUR 84 billion and EUR 87 billion
- EBIT before special items expected to be between EUR 4.8 billion and EUR 5.4 billion
According to the company’s website press release on February 24, 2023, in the 2022 financial year, the BASF Group showed resilience in a difficult market environment, which was characterized by the consequences of the war in Ukraine and, in particular, by increased raw material and energy prices. As BASF CEO Dr. Martin Brudermüller and CFO Dr. Hans-Ulrich Engel explained when presenting the figures for the 2022 financial year, BASF increased its sales by 11.1 percent to 87.3 billion euros. Higher prices in almost all segments as a result of higher raw material and energy prices were essential for the sales growth. Materials and Chemicals saw the highest price increases. Overall, significantly lower sales curbed the sales growth of the BASF Group.
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. The decline in earnings was due to a sharp drop in earnings contributions from the Chemicals and Materials segments. Both segments experienced lower margins and volumes as well as higher fixed costs.
By contrast, all other segments were able to increase their EBIT before special items. Agricultural Solutions increased it significantly, in particular as a result of the positive sales trend resulting from higher sales volumes and prices. The Nutrition & Care segment also increased it significantly, mainly due to price-related increased margins. Surface Technologies reported significantly higher earnings, mainly due to higher earnings contributions from the automotive catalysts and battery materials businesses. Higher prices and volumes in the Coatings division also supported the segment's earnings development. Industrial Solutions slightly increased EBIT before special items as a result of price-related higher margins. Other slightly improved EBIT before special items.
In 2022, the operating result of the BASF Group was burdened by additional energy costs of 3.2 billion euros worldwide compared to the previous year. Around 84 percent of this increase was attributable to Europe, which primarily affected the Verbund site in Ludwigshafen. The increased cost of natural gas accounted for 69 percent of the total energy cost increase worldwide.
In 2022, special items in EBIT amounted to minus 330 million euros, after minus 91 million euros in the previous year. At 6.5 billion euros, the EBIT of the BASF Group in 2022 was significantly lower than in the previous year. The result from integral companies accounted for using the equity method contained therein fell by EUR 289 million to EUR 386 million.
Exceptionally high value adjustments on the stake in Wintershall Dea AG weighed on the investment result of the BASF Group. In 2022, the investment result was minus 4.9 billion euros after 207 million euros in 2021. The reason for the significant decrease was special expenses of around 6.3 billion euros, mainly from non-cash impairments on the investment in Wintershall Dea AG . These resulted in particular from the deconsolidation of Wintershall Dea's Russian exploration and production activities, as a result of which Wintershall Dea's Russian investments were revalued. Impairments were also made on Wintershall Dea's European gas transport business,
The result after taxes and non-controlling interests of the BASF Group was minus 627 million euros after 5.5 billion euros in 2021 as a result of the significantly lower result from investments.
Sales and earnings development of the BASF Group in the fourth quarter of 2022
BASF Group sales fell by 2.3 percent to EUR 19.3 billion in the fourth quarter of 2022, mainly due to lower volumes. EBIT before special items fell by 69.6 percent compared to the fourth quarter of 2021 to EUR 373 million.
The special items in EBIT amounted to minus EUR 254 million, after plus EUR 1 million in the fourth quarter of 2021. The special items mainly related to non-cash impairments on plants in Ludwigshafen. EBIT fell by 90.3 percent to EUR 119 million in the fourth quarter of 2022. Earnings after taxes and non-controlling interests amounted to minus 4.8 billion euros after 898 million euros in the fourth quarter of 2021. The decrease is due to the impairment of the stake in Wintershall Dea.
BASF Group cash flow in 2022 and in the fourth quarter of 2022
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.
In the fourth quarter of 2022, cash flow from operating activities improved by EUR 1.1 billion year-on-year to EUR 4.5 billion. Free cash flow increased by 749 million euros to 2.6 billion euros in the fourth quarter.
Dividend proposal of EUR 3.40 per share
At this year's BASF Annual General Meeting, the Board of Executive Directors and the Supervisory Board will propose a dividend of EUR 3.40 per share, the same as last year. Based on the year-end price, this results in a high dividend yield of 7.3 percent. In total, BASF will pay out 3.0 billion euros to its shareholders.
Outlook 2023 for the BASF Group
The high level of uncertainty that shaped 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 corona pandemic will continue in 2023. All of these factors will weigh on global demand. BASF therefore expects only moderate growth of 1.6 percent for the global economy in 2023 (2022: 3.0 percent). For global chemical production, BASF expects growth of 2.0 percent (2022: 2.2 percent). The company expects an average oil price of 90 US dollars per barrel of Brent and an average exchange rate of 1.05 US dollars per euro.
Based on these assumptions, the BASF Group is expected to generate sales of between EUR 84 billion and EUR 87 billion in 2023. The BASF Group's EBIT before special items is expected to fall to between EUR 4.8 billion and EUR 5.4 billion. BASF expects a weak first half of 2023. The company expects an improved earnings situation in the second half of 2023 from catch-up effects, especially in China.
BASF specifies measures to save costs in Europe and to adapt the Verbund structures in Ludwigshafen
As part of his presentation, Martin Brudermüller also presented concrete measures of 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 over-regulation. It is also suffering more and more from slow and bureaucratic approval processes and, above all, from high costs for most production factors,” says Brudermüller. “All of this has slowed 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.”
From the end of 2024 annual cost savings of more than 500 million euros
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. After completion of the program, BASF expects annual cost savings of more than 500 million euros in non-production units, i.e. in corporate and service areas, in research and development (R&D) and at corporate headquarters. About half of these savings are expected at the Ludwigshafen site.
The measures of this program include the consistent bundling of services in hubs, the simplification of structures in the management of corporate divisions, the needs-based tailoring of business services and the increase in the efficiency of R&D activities. The bottom line is that the measures are expected to affect around 2,600 jobs worldwide; this number includes new jobs to be created, primarily in the hubs.
From the end of 2026, the adjustment of the network structures in Ludwigshafen will probably lead to annual fixed costs being reduced by more than 200 million euros
In addition to the cost-cutting program that has been initiated, BASF is also taking structural measures to better prepare the main plant in Ludwigshafen for the increasingly fierce competition in the long term. “We are doing this because, even in the 158th year of its existence, we still believe in the Ludwigshafen location, in the people who work here and in the Europe region. We remain loyal to the location and have the courage to develop further," says Brudermüller.
In recent months, the company has subjected its network structures in Ludwigshafen to a thorough analysis. This has shown how the continuity of profitable business can be ensured and how necessary adjustments can be made at the same time. The most important changes at the Verbund site in Ludwigshafen at a glance:
- Closure of the caprolactam plant , one of the two ammonia plants on site and related fertilizer plants : BASF's caprolactam plant in Antwerp/Belgium has sufficient capacity to meet future demand for its own use and the European market. Highly refined products such as the leading business with standard and specialty amines and Adblue ® will remain unaffected and will continue to be supplied via the remaining ammonia plant at the Ludwigshafen site.
- Reduction of production capacities for adipic acid and closure of the plants for cyclohexanol and cyclohexanone as well as heavy soda : Adipic acid production in the joint venture with Domo in Chalampé, France, remains unchanged and – in the changed market environment – has sufficient capacities to supply the business in Europe. Cyclohexanol and cyclohexanone are precursors for adipic acid; the soda plant utilizes by-product streams from adipic acid production. BASF will continue to operate the production facilities for polyamide 6.6 in Ludwigshafen, which require adipic acid as a precursor.
- Closure of the TDI plant and the plants for the preliminary products DNT and TDA : Demand for TDI is developing very weakly, particularly in Europe, the Middle East and Africa, and is well below expectations. The TDI plant complex in Ludwigshafen was underutilized and does not meet economic expectations in this market environment. Due to the sharp rise in energy and supply costs, the situation has continued to develop unfavorably. European BASF customers will continue to be reliably supplied with TDI in the future - via BASF's global production network with plants in Geismar/USA, Yeosu/Korea and Shanghai/China.
A total of 10 percent of the replacement value of the systems at the Ludwigshafen site will be affected by the adjustment of the network structures and probably around 700 jobs in production. Brudermüller emphasized: “We are very confident that we can offer employment in other companies for most of the employees affected in production. We are very interested in retaining their broad experience for the company, especially in view of the vacancies and the increasing number of retirements.” The measures will be implemented step by step until the end of 2026. As a result, BASF expects to be able to reduce fixed costs by more than 200 million euros per year.
The structural changes will also lead to a significant reduction in electricity and natural gas requirements at the Ludwigshafen site. This will reduce CO 2 emissions in Ludwigshafen by around 0.9 million tons per year; this corresponds to a reduction of around 4 percent in BASF's global CO 2 emissions.
"We want to develop Ludwigshafen into Europe 's leading low-emission chemical location," says Brudermüller. BASF wants to ensure a stronger supply of the Ludwigshafen site with renewable energies. The use of heat pumps and low-CO 2 methods of steam generation are also planned. New CO 2 -free technologies such as water electrolysis are to be used to produce hydrogen.
About BASF
Chemistry for a sustainable future, that's what BASF stands for. We combine economic success with environmental protection and social responsibility. More than 111,000 employees in the BASF Group contribute to the success of our customers from almost every industry and in almost every country in the world. Our portfolio comprises six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions. In 2022, BASF achieved sales of €87.3 billion worldwide. BASF shares are traded on the Frankfurt Stock Exchange (BAS) and as American Depositary Receipts (BASFY) in the USA. More information at www.basf.com.
