BASF has unveiled a company-wide reorganization in a bid to hike profits by $2.3 billion annually by 2021, the equivalent of increasing pretax profits by between 3 and 5% per year. The firm also aims to increase annual sales of products it claims make a substantial contribution to sustainability to $25 billion by 2025.
BASF’s reorganization will involve moving its 11 business units into six divisions. The company will also simplify structures and processes, sharpen its portfolio, and better align its businesses to its customers. “We will transform our organization to be more agile and customer focused,” BASF Chairman Martin Brudermüller told journalists at a briefing at the firm’s headquarters in Ludwigshafen, Germany, on Nov. 20.
As part of its restructuring, the firm aims to enhance efficiencies in production, logistics, and R&D. This will include moving some of the firm’s centralized R&D activities into business units. Other planned changes include the wider use of digitization and automation. The firm will invest about $460 million annually on efficiency improvements—significantly more than it has spent in previous years.
The restructuring will impact about 20,000 of the firm’s 115,000 employees, but BASF will not necessarily cut jobs, according to Brudermüller. Although efficiency improvements will be needed, more staff will be required to implement the planned growth of the business, Brudermüller said.
The firm plans to digitize processes at more than 350 of its plants around the world by 2022. But the BASF chairman rejected the notion that rolling out digitization across the business will necessarily lead to job losses.
The planned uptick of the business will be derived largely from organic growth and through the continued application of the firm’s “Verbund” strategy of highly integrated manufacturing plants. The firm will, however, seek to adjust its portfolio. To this end, the firm is continuing with previously announced plans to divest its construction chemicals business.
BASF said it is seeking to secure all future growth of its business without increasing carbon dioxide emissions. The effort will not result in one or two big measures but many smaller measures, Brudermüller said. “Hardly anything comes for free. Electricity from renewables will have a high cost,” he said.
Brudermüller denied that slowing chemical market growth in China is a major problem for BASF. “Our new Verbund site in Zhanjiang in Guangdong province and the expansion of the site in Nanjing will significantly enhance our growth in this dynamic market,” he said.
Financial markets responded negatively to the restructuring plan. Despite BASF promising to increase its dividends to shareholders as part of its new growth plan, the firm’s share price after the briefing had dipped by about 4% to $76.60 per share.