BASF unveils new growth strategy：CO2-neutral growth

German chemicals giant, BASF, has unveiled a new growth strategy that focusses on annual earnings contributions of €2-bn from 2021 onwards, leaner organisational structure, a strong focus on China and higher sales of products that contribute to sustainability.

Under the programme, BASF said it would aim for 3 to 5 per cent annual growth in earnings before interest, taxes, depreciation and amortisation (EBITDA) after averaging 8 per cent a year since 2012. The German firm said it will initiate a new excellence programme which will run from 2019 until 2021 under which it will target annual earnings contributions of €2-bn from the end of 2021 onwards. The programme to shore up EBITDA “will include measures focused on production, logistics, R&D as well as digitalisation and automation activities and organisational development,” it said in a press statement.

In its organisational restructuring, set to take shape from January 1, 2019, BASF will have six segments, each containing two operating divisions, with the exception of Agricultural Solutions which will continue to comprise one division. The segments include Chemicals (petrochemicals and intermediates), Materials (performance materials and monomers), Industrial solutions (dispersions & pigments and performance chemicals), Surface technologies (catalysts and coatings), Nutrition & care (care chemicals and nutrition & health) and Agricultural solutions.

BASF said it is creating leaner structures for services, in R&D and in governance functions. By embedding significant parts of the functional services into the operating divisions, BASF plans to bring its employees closer to its customers. “The remaining functional and research activities will be more efficiently organised. Approximately 20,000 employees worldwide will be directly or indirectly affected by this reorganisation,” the company informed in the press note.The company emphasised that it will focus primarily on organic growth, but will make acquisitions where necessary. “Our main emphasis will be on designing processes to be efficient and reliable. Businesses where we cannot achieve such a position will eventually be exited,” said Dr. Martin Brudermüller, BASF’s Chairman.

BASF said greater decision-making authority would be transferred to the business units. “We expect all these measures to result in better differentiation of the business units as well as substantial productivity gains,” saidDr. Hans-Ulrich Engel, BASF’s Chief Financial Officer and Vice Chairman.

Flat greenhouse gas emissions

BASF said it will concentrate on higher-added-value products and increase its investment in China while working to ensure its greenhouse gas emissions remain flat between 2018 and 2030. Emphasising the focus on China, Dr. Brudermüller said, “By 2030, China’s share of the market will increase to nearly 50% and we want to participate in this growth. 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.”

In addition to the target of CO2-neutral growth until 2030, BASF wants to generate around €22-bn in sales by 2025 with products that make a substantial contribution to sustainability. Dr. Brudermüller said that the Verbund would continue to play a central role for BASF. “BASF’s portfolio has unique benefits because of physical as well as technological, market-related and digital Verbund advantages. Thanks to the integrated production in the Verbund, BASF achieves annual cost savings of at least €1-bn, for example. BASF will continue to lead the industry in building and developing Verbund structures and in consolidating operations at fewer, highly efficient sites,” the company said.