BASF readies a massive restructuring

BASF, the world’s biggest chemical company, is embarking on a major new strategy that in the next few years may see it exit agrochemicals, battery materials, coatings, and environmental catalysts.

The four businesses had combined sales of about $28 billion last year—37% of BASF’s overall sales. But the company no longer considers them core and will make them independent entities while it decides their ultimate fate, CEO Markus Kamieth told financial analysts during a Sept. 26 briefing in Ludwigshafen, Germany.

The strategy is intended to unlock the financial value of the noncore businesses while enabling BASF to refocus its core activities on sustainable products made from recycled or renewable materials. “The green transition is changing the setup,” Kamieth said. “We are at a turning point as a company. We are facing the moment of truth.”

Chemicals, materials, industrial solutions, and nutrition and personal care will remain core businesses. “We want to be—and remain—a chemical company at our core. This is our DNA,” said Kamieth, who became BASF’s head in April.

A sale of all the noncore businesses would mark a radical shake-up and could result in BASF losing claim to the title of the world’s largest chemical company.

BASF’s plan for its agrochemical business is the most advanced. Its goal is to get the business ready for an initial public offering by 2027. BASF plans in the medium term to remain a majority shareholder, Kamieth said. It is one of the last major Western chemical makers that is also a key player in agrochemicals.

BASF’s environmental catalyst and metal business includes catalytic converters used in internal combustion vehicles. Here, Kamieth said, the firm “will seek out collaborations.” BASF intends to keep its chemical catalyst business, which it has moved to its industrial solutions division.

The company will seek a partner for its battery materials business. In the meantime, it will look to fill existing capacity for producing battery materials rather than build new plants, Kamieth said.

For BASF’s coatings business, which features products such as automotive paints, “we will explore strategic options,” including placing the business in a partnership or selling it with a different owner, Kamieth said. As a near-term move, BASF is poised to divest its decorative paint business in Brazil.

During the briefing for analysts, Morgan Stanley’s Tom Wrigglesworth questioned whether BASF could increase profits with its sustainable product approach. Kamieth’s response was that BASF’s progress in making such products would be steady and in line with market demand. He acknowledged that getting premium prices for green products is still “hit and miss.”

As part of the new strategy, BASF announced a cost-cutting program at its Ludwigshafen site that’s intended to save $1.1 billion annually by 2026. It is in addition to a plan to reduce costs across the company by $1.2 billion annually, also by 2026.

Half of the new cuts will come from activities such as process optimization; headcount reduction will be a major element of the other half. “We have to bring our personnel costs down in Ludwigshafen,” said Katja Scharpwinkel, BASF’s board member responsible for European operations.