BASF Shifts Gears, Axes Sales Targets for Select Divisions
In a surprising move, German chemical giant BASF has opted to spin off two of its divisions – battery materials and agriculture – and refrain from setting sales targets for individual business sectors going forward. This announcement came after the company confirmed the separation of its coatings division, mirroring a trend seen in various sectors.
The decision to let go of sales targets for specific divisions, such as Chemistry and Nutrition & Care, signals a shift in BASF's corporate strategy, emphasizing margin targets instead. Following CFO Dirk Elvermann's announcement, roughly 2390 jobs in Germany will be affected by this major change.
The Russian conflict and its impact on the economy have taken a heavy toll on the chemical industry giant. Recorded losses for BASF in 2022 totaled over a billion euros, primarily due to the withdrawal of its Wintershall Dea subsidiary and write-offs on its Nord Stream AG stake.
BASF's Board of Executive Directors is behind this decision to grant more independence to the battery, agricultural, and coatings divisions, allowing them to better adapt to customer demands. Divisions focusing on basic chemicals, industrial materials, additives, and consumer goods ingredients will continue to remain strongly integrated.
Despite the criticism from unions, such as the IGBCE, BASF CEO Martin Brudermüller has rejected the notion of selling the divisions or initiating a wage dumping scheme. The CEO affirmed that all divisions would remain an essential part of BASF.
In the face of dwindling sales forecasts since 2024, BASF will no longer provide sales projections. Instead, the company will disclose targets for earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), as well as cash inflow.
Behind the Scenes
BASF's decision to explore the potential listing of its agricultural chemicals division is an integral part of its strategic plans. By focusing on core businesses and providing the agricultural unit with operational independence, the company aims to attract new investors, drive innovation, and boost financial performance.
While the decision comes with potential risks, thorough due diligence, diversification of portfolios, and strategic flexibility may help mitigate these concerns. By adapting to a rapidly evolving market landscape, BASF can secure its position in the chemical industry and sustain its long-term goals.
