- BASF’s announcements of mass layoffs come after the German chemical company posted losses of 630 million.
- In particular, the biggest layoffs will be in Europe, especially in Germany. There, adipic acid production capacity will be reduced and the cyclohexanol and cyclohexanone plants will be closed.
- BASF expects an operating profit before exceptionals of between 5 and 5.7 billion dollars by 2024.
The German chemical company BASF will carry out a massive layoff affecting 2,600 workers worldwide. The objective: to reduce costs by 500 million dollars per year as of the next fiscal period.
The company informed that a large part of this cost reduction will be carried out at its headquarters in Ludwigshafen, Germany, where around 1700 workers will be laid off.
The reason for this measure is the reduction in production capacity and demand for natural gas due to the price increase caused by the war between Russia and Ukraine.
The job cuts were announced this Friday, February 24, after presenting the results report, where the chemical company registered net losses of 660 million dollars during the last year, which represents a drop with respect to the profits of 5.8 billion dollars of the previous year, according to BASF.
Revenue, on the other hand, posted an 11 percent increase to $92.1 billion, up from revenue of $82.9 billion in 2021.
BASF plans to close facilities in Ludwigshafen, which would affect 700 workers on the production line. The closures cover a caprolactam plant, an ammonia plant and linked fertilizer factories.
It also said there will be a reduction in adipic acid production capacity and will close the cyclohexanol and cyclohexanone plants, which precede adipic acid, as well as reducing soda ash production capacity.
Another plant to be closed is TDI, as its demand fell in Europe, the Middle East and Africa.
BASF’s losses due to the war in Ukraine
The German chemical company’s CEO, Martin Brudermüller, said he is confident that they will be able to offer a position at other facilities to a large part of the laid-off workers.
The company terminated early its $3.1 billion share buyback program.
BASF already announced last month that it had suffered losses of $1.4 billion over the past year after its oil and gas subsidiary Wintershall Dea exited its Russian operations, compared with earnings of $5.8 billion in 2021.
The German company recorded impairment losses on its shares in Wintershall Dea of $7.7 billion, of which $5.7 billion was booked in the last quarter.
This impairment loss was caused by Wintershall Dea ceasing exploration and production activities on Russian territory, which will leave Russia in an orderly manner and in compliance with its legal obligations.
Expectations for 2023/2024
Revenues of the world’s largest chemical group rose in 2022 to $92.1 billion, up 11 percent from the previous year, following price increases and the positive impact of exchange rates, even though sales volume fell.
Management and the board of directors are going to propose at the next shareholders’ meeting to distribute a dividend of 3.6 dollars per share, as in 2022.
The German company estimates that in 2024 it will generate sales of between $88.5 billion and $91.7 billion and an operating profit before exceptionals of between $5 billion and $5.7 billion. BASF forecasts that the first half of the year will be complicated but expects an improvement in the second half of the year due to the recovery in China.
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