● Launched differentiated management concepts and released new financial key performance indicators
● Commitment to reduce Scope 3.1 carbon emissions by 15% by 2030 compared with 2022; by 2050, achieve Scope 3.1 net zero emissions
BASF continues its journey towards net-zero emissions with scope 3.1 Commit to carbon emission reduction targets. At an investor and analyst meeting in Ludwigshafen, Germany, Dr. Martin Brudermüller, Chairman of the Executive Board of the BASF Group, and Chief Financial Officer Dr. Dirk Elvermann reports from 2018 Implementation progress since the release of the corporate strategy in 2016. The two briefly described how to implement corporate strategies and achieve cash usage priorities, while proposing to improve business profitability through differentiated management.
Implement cash priorities
BASF's corporate strategy is based on endogenous growth. About 60% of the company's spending between 2018 and 2022 will be on capital expenditures and R&D.
Dr. Brudermüller noted that the Executive Board of the BASF Group attaches great importance to shareholder returns and attractive dividends. He said: “BASF has increased its dividend in three of the past five years, even in 2020 and 2020 when the external environment was unfavorable. In 2022, dividends will remain at the same level as the previous year. "Since 2018, the company has paid a total of 15.8 billion euros in dividends, with an average annual dividend rate of 5.6 %. BASF's generous dividends over the past decade have been built on the company's strong cash flow. Between 2013 and 2022, cash flow from operating activities averaged €7.7 billion per year and free cash flow averaged €7.7 billion per year. 3.4 billion euros.
BASF actively manages its business portfolio and focuses on innovative growth businesses. Over the past five years, the company has divested businesses with sales of 5 billion euros and acquired businesses with sales of 4 billion euros.
Differentiated business management and improved profitability
2018 A key element of the corporate strategy proposed in 2017 is to transform BASF into a customer-centric organization by empowering its business units to better meet customer needs. Since then, BASF has taken various measures to improve the management capabilities of each business unit.
Elvermann The doctor said: "The company is taking a solid step to adjust the management model of each business to continue to enhance BASF's competitiveness. We will manage each business department in a more differentiated way, combining differentiated management and integrated business and the advantages of an integrated corporate organizational structure.”
Through differentiated management, each business will further adjust its specific business model and process, while adapting to the corresponding process structure, information technology system and management framework. For businesses that are less integrated with the integrated business, the company will provide them with more room for autonomy to better meet the needs of their customer industries while maintaining the advantages of being an integrated enterprise. This approach will be used in the Battery Materials and Coatings business unit within the company's Surface Technology business area, as well as Agricultural Solutions.
BASF will continue to be value chain-oriented and manage integrated businesses such as chemicals, materials, industrial solutions, and nutrition and care, improve resource utilization efficiency, integrate demand, and synchronize and deeply integrate production to create value. Going forward, value chain management will become even more important, with companies providing their products with sustainable added value such as product carbon footprint, biomass or recycled content.
2024 1 Starting this month, BASF will adopt new key performance indicators (KPIs) to guide the entire group. In the short to medium term, the company will place greater emphasis on earnings before interest, taxes, depreciation and amortization and cash flow before special items. At the same time, the company will continue to use return on capital employed (ROCE) as a key performance indicator for mid-term management and continue to focus on asset profitability.
Under differentiated management, BASF will introduce different key performance indicators for its business operations. For businesses that focus on a single industry, BASF will be more strictly guided by key performance indicators specific to that industry, and for businesses that are deeply integrated with integrated businesses, they will be managed along the value chain.
BASF will attach great importance to the cash flow generated by all businesses. In addition, the yield target before interest, taxes, depreciation and amortization before special items is as follows:
● Integrated business: 17% during the cycle
● Battery materials: 30% or more by 2030 (excluding metal transactions)
● Coatings: 15% or more in the medium term
● Agricultural Solutions: 23% or more in the medium term
BASF will also adjust its external reporting and forecasts in response to changes in its management approach. BASF Group's 2023 Performance Report is expected to be released on February 23, 2024 Released on the same day. Among them, at the group level, BASF will forecast earnings before interest, taxes, depreciation, and amortization and free cash flow before special items, but will no longer forecast sales, earnings before interest and taxes before special items, and return on capital employed (ROCE). ) to look forward. Additionally, at the business segment level, the company will forecast earnings before interest, taxes, depreciation, amortization and cash flow before special items.
Continue to move towards net zero emissions
BASF also updated investor representatives on its latest progress on the road to climate neutrality. BASF in 2018 corporate warFor the first time, the strategy puts forward the goal of ensuring that carbon dioxide emissions remain unchanged while achieving business growth. In March 2021, BASF significantly increased this target, setting scope 1 and scope 2 Specific emission reduction goals: by 2030, reduce emissions by 25% compared with 2018; by 2050, achieve net zero emissions. To achieve this goal, BASF is focusing on the use of renewable energy and carbon reduction technologies.
BASF has made progress in obtaining reliable raw emissions data related to the raw materials it purchases. Based on this, BASF believes that there is currently a sufficiently solid basis for developing Scope 3.1 emission reduction targets. BASF’s latest goal is to reduce the carbon emissions of relevant business portfolio scope 3.1 by 15% by 2030 compared with 2022. This means that the carbon dioxide produced per kilogram of purchased raw materials will be reduced from 1.57 The kilogram was reduced to 1.34 kilograms.
Dr. Brudermüller said: “Our focus is to improve the carbon footprint of the products we sell, so we have set this specific goal and calculated the carbon footprint in units of CO2 emissions per kilogram of BASF products. We are very focused on our short- and long-term goals and the direction of our efforts. Be clear: BASF will work with customers and suppliers to find economical, environmentally friendly and practical solutions. Our long-term goals are also clear: We are committed to Achieve Scope 3.1 net-zero emissions by 2050. "
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