Volume 89 Issue 49 | p. 8 | News of The Week
Issue Date: December 5, 2011

BASF Promotes Growth Agenda

Strategy: Firm targets high-margin businesses and emerging markets
Department: Business | Collection: Economy
Keywords: Europe, Germany, economic forecast, earnings, revenue, growth, battery materials, emerging markets
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BASF’s Engel (left), chief financial officer; Bock (center), chairman; and Martin Brudermüller, vice chairman, at last week’s presentation.
Credit: BASF
Left to right: BASF’s Hans-Ulrich Engel, Chief Financial Officer; Kurt Bock, Chairman of the Board of Executive Directors ; Martin Brudermüller, Vice Chairman of the Board of Executive Directors.
 
BASF’s Engel (left), chief financial officer; Bock (center), chairman; and Martin Brudermüller, vice chairman, at last week’s presentation.
Credit: BASF

BASF plans to expand sales by an ambitious 6% per year until 2020 as part of a growth strategy it unveiled for investors on Nov. 29. The German firm, the world’s largest chemical company, sounded a note of optimism that is rare in Europe these days, especially considering foreboding economic forecasts.

According to the new strategy, called “We create chemistry,” BASF expects to sell $150 billion in products annually by 2020, compared with $85 billion in 2010. The company plans to expand emerging-market sales to 45% of revenues in 2020 from 33% in 2010.

BASF will invest more than one-third of a projected $40 billion in capital expenditures through 2020 in emerging markets. “We already have leading positions and fast-growing businesses in emerging markets, and this is something we will build on,” said Chairman Kurt Bock, who took the helm at BASF in May.

Rather than shed businesses, BASF said it will use its diverse portfolio to achieve growth. BASF operates oil and gas businesses and makes traditional chemicals, specialty chemicals, and functional materials. To get closer to downstream customers, BASF acquired specialty chemical firm Ciba in 2009 and personal care ingredients maker Cognis in early 2010.

As part of a focus on its automaker customers, BASF said earlier this month that it will create a new global business for battery materials. The business will include cathode materials, electrolyte formulations, and products for next-generation lithium batteries.

Finally, Chief Financial Officer Hans-Ulrich Engel said BASF will take actions to boost its share value by continuing its dividend policy and possibly buying back shares. It plans a cost-cutting program that will contribute $1.3 billion to earnings by the end of 2015.

BASF’s revenue and earnings targets are aspirational, and executives declined to provide a 2012 forecast, points out Geoff Haire, head of chemical equity research for HSBC Bank. “The new management team is saying the strategy has not been changed, but it has been modified,” Haire tells C&EN. “They presented a road map to build a less cyclical company which will strive to deliver innovative chemicals and maximize value from a highly complex chemical business.”

 
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