BASF is slashing nearly 2,600 jobs on high costs in Europe
February 27, 2023: BASF said it would slash 2,600 jobs and halt its share buybacks as it is making us cautious of a further decline in revenue reflecting high costs in Europe, uncertainty because of the war in Ukraine and increasing interest rates.
On Friday, the German chemicals giant said that 2023 earnings before interest and tax (EBIT), dealing with unique items, would increase between 4.8 billion euros and 5.4 billion from 6.9 billion in 2022, down 11.5% from 2021.
BASF, which laid out plans to cut annual costs in Europe by 500 million euros in October, said that this would translate into about 2,600 job cuts, nearly 65% of which would be in Germany and laid out ideas to slash another 200 million euros in annual costs.
It added that more jobs were affected overall, but the effect on workers would be tempered as new positions were created.
It added that a share buyback package, with 3 billion euros earmarked in the previous year, will be stopped following 1.4 billion euros spent on own shares because of the “profound transfers in the global economy”.
Shares in the company were down 1.1% in pre-market trade.
“Europe’s competitiveness is surging suffering from overregulation, slow and bureaucratic which permits processes, and in particular, high costs for the production input factors,” said Chief Executive Martin Brudermueller.
European natural gas prices soared in the year after Moscow invaded Ukraine. Although European prices have eased to nearly 50 euros per megawatt-hour (MWh) from last August’s peak of over 340 euros, they remain above historical averages.
BASF announced a 7.3 billion euro writedown for the previous year on the value of its Wintershall Dea energy business, pulling out of Russia.
According to the unscheduled release, it was leading to a 1.38 billion euro total 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. Still, several production lines would also be shuttered at its Ludwigshafen headquarters, home to its significant chemical complex with about 39,000 staff, with workers mainly transferred internally.
Including 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 like engineering plastics and diesel exhaust cleaning fluid. However, BASF said customers’ demands would still be met.
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