BASF forges ahead with efficiency drive
BASF told investors on Friday it was pressing on with its drive to make it's business simpler and more efficient, confirming its forecasts after issuing a profit warning in July while cautioning that visibility was low.
The world's largest chemicals company by sales will hit its target of saving costs by an annual 2 billion euros ($2.2 billion), CEO Martin Brudermueller said at a presentation that added detail to, but did not tweak, BASF's strategic goals.
"The sense of urgency is very clearly there," Brudermueller said in response to a question about whether BASF's divisional bosses understood the need to transform the business that spans everything from petrochemicals to agriculture.
"I have never seen any phases at BASF where we have changed so many pieces so quickly," added Brudermueller, who has worked for the company for more than 30 years and became CEO in May 2018.
Brudermueller has kept divergent businesses folded into one company even as competitors have take more radical action to restructure in the face of growing trade and technology challenges.
BASF last November set a long-term goal for growth in core earnings (EBITDA) before special items of 3-5% per year. In June, it laid out plans to slash 6,000 jobs worldwide, mainly in central administration.
It then shocked markets in July with a profit warning, predicting a decline in 2019 adjusted EBITDA of as much as 30%, as a global economic slowdown and trade war between the United States and China hit demand.
Executives said on Friday that business in July, August and so far in September was in line with a year ago.
Yet visibility is shortening, said Chief Financial Officer Hans-Ulrich Engel, who noted that 75-80% of BASF's order book was covered by the two months ahead.
The divestiture of its construction chemicals business should be signed this year, while BASF wants to float its oil and gas venture with Russian billionaire Mikhail Fridman's LetterOne, Wintershall DEA, in late 2020.
Net debts have been pushed up to 18.5 billion euros by the acquisition last year of assets from Bayer. Engel said he would be more comfortable with a level around 15 billion.
BASF said in a separate presentation its agriculture division would outgrow the global market by one percentage point a year and increase sales by half through 2030 as it innovates in crops and digital farming.
BASF Agricultural Solutions will launch over 30 new products by 2028, with peak sales potential of 6 billion euros. The division aims to grow core earnings before special items by 5% per year.
($1 = 0.9168 euros) (Reporting by Douglas Busvine; Editing by Mark Potter)
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