Global chemical producer BASF is quickly cutting back its European operations as surging energy costs and tightened regulations in the region make it increasingly difficult to remain competitive.
BASF on Wednesday said it will slash costs in the EU “as quickly as possible and also permanently” as energy prices in the region become too high for business sustainability. The chemical giant revealed natural gas costs at its European sites were €2.2 billion higher in the first nine months of 2022 compared to the same period one year ago. “The European chemical market has been growing only weakly for about a decade [and] the significant increase in natural gas and power prices over the course of this year is putting pressure on chemical value chains,” said the company’s CEO Martin Brudermüller.
The company’s third quarter sales increased 12% year-over-year to €21.9 billion, largely due to higher prices. Profits before tax slumped €538 million to €1.2 billion, which the chemical maker blamed on lower earnings across its chemical division. Germany is one of BASF’s most crucial revenue markets, accounting for about 18% of sales since the beginning of the year. However, Brudermüller explained the cost cuts were essential in safeguarding “our medium and long-term competitiveness in Germany and Europe.”
BASF’s latest announcement comes as the company last month started up the first portion of its new €10 billion plastics engineering facility located in China, which is expected to boost chemical supply for the country’s increasing demand.
Information for this briefing was found via BASF. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.