BASF is to wind down several of its plants in Germany as the world’s largest chemical group by revenue struggles with high energy costs and plans increased production in China.
The German company said on Friday that it would close one of its two ammonia plants at its home site in Ludwigshafen as well as the units producing caprolactam, a chemical used to make fibres and plastics, and TDI, a compound used to make flexible foam.
The plans, which are expected to lower the group’s annual costs by €200mn by the end of 2026, will also lead to reduced production in Germany of adipic acid — a compound used to make nylon — as well as closure of three other plants that were needed in its production.
Despite the retrenchment, chief executive Martin Brudermüller said the move reflected BASF’s commitment to the site. “We are doing this because we believe in the future of the Ludwigshafen site, which is now in its 158th year,” he added. “We believe in the people who work here, and we believe in the region.”
The additional cuts announced on Friday will lead to a net loss of 2,600 jobs, mainly in Germany. BASF said that the plans would lead to a “significant” reduction in its demand for natural gas in Germany, reducing its CO2 emissions by 0.9mn metric tonnes per year, the equivalent of a reduction of around 4 per cent in BASF’s global CO2 emissions.
The latest cost-cutting comes on top of an existing plan to reduce costs by €1bn over the next two years, which the company announced last year, saying that it would “permanently” downsize in Europe, as high energy costs were making the region increasingly uncompetitive.
BASF is one of several large German groups that are making a big bet on China, where it is building a €10bn plastics engineering facility, which it says will support growing demand in the country.
The company last month unveiled a €7.3bn writedown for 2022, due to the Russian government having expropriated gas and oil wells in the country belonging to its business Wintershall Dea. BASF had at the time warned it would swing to a €1.4bn net loss in 2022, a figure that it revised to a €627mn net loss on Friday.
BASF expects adjusted earnings before interest and tax to be between €4.8bn and €5.4bn this year compared with the €6.9bn recorded in 2022.
Brudermüller said that Europe was suffering from overregulation, slow and bureaucratic permitting processes and high costs for most production inputs.
“All this has already hampered market growth in Europe in comparison with other regions. High energy prices are now putting an additional burden on profitability and competitiveness in Europe.”
Shares were down 5.5 per cent to €49.28 on Friday morning.