BASF is about to face major changes!

On December 7, according to the German Handelsblatt, BASF announced that it would separate the three large business units of agricultural products, coatings, and battery materials from the company’s existing structure and transform them into legally independent entities. unit.

The three divisions of the spin-off will have their own information technology and control systems, but will remain part of the BASF Group.

Selling the business is not the purpose

It is reported that the sale of these business units is not the purpose of BASF's spin-off measures. BASF emphasized that there are currently no plans to sell these units.

The main reason for this spin-off is that it will be managed and controlled according to different standards in the future, BASF Chief Financial Officer Dirk Elvermann explained that BASF wants to improve its competitiveness by adapting its business management. The company is combining a more differentiated approach to the management of individual businesses with the product strengths of this business and our positioning as an integrated company to meet the needs of specific customer industries. Demand has given these independent departments greater space for activities.

The departments facing large-scale restructuring this time are one of the group's sales drivers:

The agricultural sector has sales of €10 billion in 2022;

The coatings division, with sales of 4.2 billion euros in 2022, will gain greater freedom within the existing limited liability company;

The electric vehicle battery materials business is one of BASF's main businesses in the future.

It is reported that the coatings business has been operating independently as a limited liability company since 2010, mainly producing automotive coatings and architectural coatings.

No layoff plans

The German trade union IG BCE said the spin-off would be a serious problem for some employees. "Bad news" will affect nearly 2,500 employees, accounting for almost 10% of the total number of employees at the Ludwigshafen plant. There is widespread concern among union members that the ongoing economic downturn could lead BASF to take further cost-cutting measures:

In October, BASF has put on the agenda the sale of tens of billions of euros of business, including: 1. Oil and gas production subsidiary Wintershall Dea; 2. Internal combustion automotive catalyst business; 3. Part of the business of the coatings department; 4. Individual factories of the food additive business.

In February, BASF announced a cost-cutting plan to eliminate 2,600 jobs worldwide. The program is expected to result in savings of approximately €300 million in 2023.

However, in response to this spin-off, BASF's executive board has assured the Labor Council that the spin-off will only make the three business units more competitive in the market, and the company has no plans to lay off employees. It is reported that the union also requires BASF to extend the site agreement of the main plant until 2030. The reason is that according to the current site agreement, BASF Ludwigshafen is not allowed to lay off employees due to operational reasons before the end of 2025.

In addition, in the stock market, the above-mentioned spin-off news was welcomed. BASF’s share price rose nearly 1.5% on December 7.

Battery materials business is a top priority

The Executive Board has set goals for the spin-off: the battery materials business will become the group's most profitable business, with an operating return on sales (earnings before interest, taxes, depreciation and amortization) of 30% or higher by 2030 At a rate of return, sales will exceed 7 billion euros.

Due to the development of new energy vehicles, BASF has high hopes for its battery materials business, which is expected to generate the highest returns in the future. The company currently plans to expand its battery business on a large scale, especially in China.

It is reported that BASF plans to invest more than 4 billion euros in the electric vehicle battery materials business in the next few years to establish its leading position in the global market. BASF is currently building a large cathode materials factory in Schwarzheide, Brandenburg.

BASF Chief Financial Officer Dirk Demand for battery materials and coatings is increasingly shifting to Asia as a driver for greater independence, Elvermann said at an investor event on Thursday. Additionally, partnerships are more important in these businesses and are easier to implement legally as an independent unit.

BASF CEO Martin Brudermüller promised to achieve stable dividends in 2023.