BASF Going to Retrench Costs BASF Plans Extensive Economies and Targets an Annual Earnings Contribution of €1 Billion

Editor: Wolfgang Ernhofer

Worlds Largest Chemicval Company BASF has announced a further operational excellence program called Driv E – Drive Efficiency. It will run from 2016 to 2018 and targets an annual earnings contribution of €1 billion by the end of 2018.

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BASF prepares for new cutbacks and slows investment spend.
BASF prepares for new cutbacks and slows investment spend.
(Picture: BASF)

Ludwigshafen/Germany – BASF launched a new cost cutting programme. The German company said it would reduce investments over the next years in consequence of volatile markets and as a low oil price weighs on its oil and gas division.

“We are well on track with our ‘We create chemistry’ strategy despite a challenging environment. We are growing BASF with the goal of making it even more profitable,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF, at the Investor Day 2015 in Ludwigshafen.

Growth in chemical production to outpace global GDP

BASF expects chemical production to continue to grow well above global GDP until 2020. However, the business environment has changed since the company introduced its “We create chemistry” strategy in 2011. “Major markets did not grow as fast as anticipated. The oil price has been unpredictable and has decreased substantially. Geopolitics have contributed to higher volatility,” said Bock. As a result, BASF has slightly adjusted its expectations for the global economic environment from 2015 to 2020 (compound annual growth rates; assumptions from 2011 in parentheses):

  • Growth of gross domestic product: 3.0% (3.2%)
  • Growth in industrial production: 3.5% (3.7%)
  • Growth in chemical production: 3.9% (4.0%)

The development varies by region: The emerging markets will remain the global growth drivers; Asia Pacific is already the largest chemical market today. BASF projects that Western Europe will get back on the growth path, but on a low level. Competitive feedstock costs and an expanding economy will drive the growth of chemical production in North America.

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