BASF to cut 2,600 jobs on high costs in Europe

BASF said it would cut 2,600 jobs and halt its share buybacks as it warned of a further decline in earnings reflecting high costs in Europe, uncertainty due to the war in Ukraine and rising interest rates.

The German chemicals giant said in a statement on Friday that 2023 earnings before interest and tax (EBIT), adjusted for special items, would fall to between 4.8 billion euros ($5.09 billion) and 5.4 billion from 6.9 billion in 2022, which was down 11.5% from 2021.

BASF, which in October laid out plans to cut annual costs in Europe by 500 million euros, said on Friday that this would translate into about 2,600 job cuts, about 65% of which would be in Germany and laid out plans to cut another 200 million euros in annual costs.

More jobs were affected overall, but the affect on workers would be tempered as new positions would be created, it added.

A share buyback programme, with 3 billion euros earmarked early last year, will be stopped early after 1.4 billion euros spent on own shares due to “profound changes in the global economy”, it added.

Shares in the company were down 1.1% in pre-market trade.

“Europe’s competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and in particular, high costs for most production input factors,” said Chief Executive Martin Brudermueller.

European natural gas prices soared last year after Moscow’s invasion of Ukraine. Although European prices have eased to around 50 euros per megawatt hour (MWh) from last August’s peak of more than 340 euros, they remain above historic averages.

BASF last month announced a 7.3 billion euro writedown for 2022 on the value of its Wintershall Dea energy business, which is pulling out of Russia.

According to the unscheduled release at the time, that led to a 1.38 billion euro net loss for BASF for the year, citing preliminary figures.

On Friday, it revised the net loss downwards to 627 million euros.

Job cuts would primarily affect administrative and research positions but several production lines would also be shuttered at its Ludwigshafen headquarters, home to its largest chemical complex with about 39,000 staff, with workers mainly transferred internally.

This includes the closure of one of two ammonia plants in Ludwigshafen. Ammonia, among the most gas intensive products in the chemical industry, is used in products such as engineering plastics and diesel exhaust cleaning fluid but BASF said customers’ demand would still be met.

Among the cutbacks in Ludwigshafen, BASF will stop production of caprolactam used in engineering plastics and textile fibres, using instead a production line in Belgium.

It will also close a German TDI plant, which makes chemicals for upholstery foams.