In 2022, BASF's coatings business sales will increase by 22%, and sales volume will increase by 5%

According to the "2022 Performance Report" released by the BASF Group on February 24, the sales of the BASF Group in 2022 will be 87.3 billion euros, a year-on-year increase of 11.1%. At €6.9 billion, EBIT before special items was 11.5 percent lower than in the prior-year period.

Among them, the coatings business revenue of BASF's Surface Technologies division (Surface Technologies) was 4.22 billion euros (approximately 4.455 billion U.S. dollars), a significant increase of 22.7% from 3.440 billion euros in the same period in 2021. The main products of BASF's coatings department are coating solutions for automotive applications, surface treatment technologies and system solutions, and decorative coatings. Customer industries and applications cover the automotive industry, body repair shops, steel industry, aviation, aluminum applications in the construction and construction industries, Household appliances, painting companies and private consumers.

In 2022, the sales volume of BASF's coatings business will increase by 5.1% year-on-year, sales revenue will increase by 12.4%, and the product mix will decrease by 0.8%, while favorable exchange rates will contribute to the increase of 6.0%.

In the sales area of BASF's coatings business, Europe accounts for 30%, in fact, the Asia-Pacific region accounts for 27%, North America 25%, and South America, Africa and the Middle East account for 18%. The sales growth of the coatings department was mainly due to the stimulus opening policy after the unblocking of the epidemic in China, as well as the improvement of the supply chain in North America.

The increase in volume was mainly due to higher prices in almost all business areas affected by higher raw material and energy prices.

The sharp decline in overall sales hindered the growth of the BASF Group's sales and led to a significant decline in profits. However, BASF also said that the revenue of the surface treatment technology sector where the coatings business is located has increased significantly, especially the contribution of the automotive catalyst and battery materials business. Higher prices and volumes in the Coatings business unit also contributed to the earnings performance in this segment.

In 2022, the operating profit of the BASF Group is affected by additional energy costs of 3.2 billion euros worldwide. Europe accounted for around 84% of this cost increase, with the greatest impact on the integrated site in Ludwigshafen. Rising natural gas costs accounted for 69% of the overall increase in global energy costs. As the largest sales region of BASF coatings, Europe is facing great challenges in terms of sales and profits.

Given that economic uncertainty still exists in 2023, BASF has announced specific measures for cost reduction plans in Europe. The cost reduction plan, to be implemented from 2023 to 2024, will focus on rationalizing BASF's cost structure in Europe, especially in Germany, in response to changing framework conditions. After the overall plan is completed, it is expected to reduce the cost of more than 500 million euros per year in non-production areas, namely services, operations, R&D departments and corporate centers, of which more than half will come from the Ludwigshafen integrated base.

The specific measures of the plan will include continuous integration of services into shared service centers, simplification of departmental management structures, rational adjustment of business service scope and improvement of the efficiency of research and development activities. Globally, the measures are expected to have a net impact of about 2,600 jobs. This figure also includes the creation of new jobs, especially in shared service centres.

In addition to the cost reduction plan, BASF has also begun to make structural adjustments to the integrated site in Ludwigshafen, so that it can better cope with the increasingly severe competition challenges in the long run. Production plants related to paint production, such as the TDI plant in Ludwigshafen and the precursor plants for DNT and TDA, will be shut down. BASF said that the demand for TDI was very weak, especially in Europe, the Middle East and Africa, which was much lower than expected. The TDI complex in Ludwigshafen was underutilized and fell short of expectations in terms of economic performance. This situation is further exacerbated by the dramatic increase in the cost of energy and utility services. Relying on its global production network in Geismar, Louisiana, USA, Yeosu, South Korea, and Shanghai, China, BASF will continue to provide European customers with reliable TDI products.

Regarding the outlook for 2023, BASF expects the first half of 2023 to be relatively weak; in the second half of the year, under the influence of the recovery effect including China, the profit environment will improve.