Business

BASF relies on cost reductions and divestments – Dividend cut

BASF optimizes its portfolio, reduces costs, and cuts the dividend – stock responds with a moderate increase.

Eulerpool News Mar 3, 2025, 5:34 AM

BASF aims to increase its profitability through cost savings and the sale of non-core segments. The chemical company expects slight growth in operating profit by 2025, while weak demand in China and Europe remains a challenge.

The company plans to evaluate strategic options for its remaining coatings business by June, after having already sold its Brazilian division to Sherwin-Williams. Additionally, the agriculture sector is to be prepared for an IPO by 2027, with the final size of the IPO depending on market conditions, according to CFO Dirk Elvermann.

For 2025, BASF forecasts an adjusted EBITDA between 8.0 and 8.4 billion euros – a slight increase compared to the previous year's 7.86 billion euros. While most business areas are expected to contribute to the increase in earnings, the chemical business is likely to remain under pressure. CEO Markus Kamieth emphasized that the expected improvements must primarily be achieved through internal measures: "We consider our forecast realistic, but it also reflects the existing uncertainties.

The announced cost reductions of 2.1 billion euros annually until 2026 are progressing as planned. By the end of 2024, 1 billion euros have already been saved, with a further 1.5 billion euros planned for 2025. At the same time, the construction of a large production complex in China is impacting the result with 400 million euros.

BASF continues its financial discipline and cuts the dividend for 2024 to 2.25 euros per share—a significant decrease compared to the 3.40 euros of the previous year. This marks the end of the previous strategy of continuously increasing payouts. Free cash flow is expected to be 400 to 800 million euros, after it was still 748 million euros in 2024—significantly below the 2.7 billion euros of the previous year.

Revenue fell by 5.2 percent for the year to €65.26 billion, burdened by price pressure and currency effects. However, net profit rose to €1.3 billion, driven by the sale of Wintershall Dea shares to Harbour Energy.

Investors responded positively to the strategic reorientation. BASF shares rose by 1.8 percent on Friday afternoon.

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