(Bloomberg) -- BASF SE will cut its dividend and hive off assets as part of a broad overhaul that could involve further plant closures in Germany to counter high energy prices and a persistent slump in China.
The new measures include preparing the agricultural unit for a possible listing, confirming a Bloomberg report from earlier this month. The segment, which makes crop protection products like herbicides and fungicides, reported about €10 billion ($11.1 billion) in sales last year.
BASF shares fell as much as 3.2%, bringing the decline this year to roughly 8.4%.
Chief Executive Officer Markus Kamieth, who took over in April, is reorienting the company as Germany’s energy-intensive industries continue to struggle with high energy prices, even after they receded from record levels hit in the wake of Russia’s invasion of Ukraine. The company is also confronting a decline in global demand, particularly in China, which has driven profit growth across industries in recent decades.
Kamieth’s strategy underscores the problems facing Germany, which is struggling to maintain its industrial base amid higher energy costs and competition from China. The company is weighing additional closures at its Ludwigshafen site, Europe’s biggest chemical plant, as part of its plan to cut annual costs by €2.1 billion by the end of 2026.
An internal analysis showed that 16% of Ludwighafen’s 900 output units are at a short to medium term risk of becoming uncompetitive, BASF said in a presentation to investors. The plant is expected to achieve annual cost savings of about €800 million by the end of 2024. Headcount reductions will be part of trimming an additional €1 billion in costs at the site, which employs 39,000 people.
At the same time, the company is coping with a costly transition to cleaner technologies. BASF said it sees €600 million in annual costs related to the shift in the coming years.
The dividend will be at least €2.25 per share, the lowest in more than a decade. It’s also a reversal from last year, when BASF said it planned to increase the dividend per share every year based on a strong free cash flow.
The company said it’s targeting a share buyback from 2027 of around €4 billion, resulting in total payouts to shareholders of at least €12 billion between next year and 2028.
The German manufacturer aims to improve returns in its main chemicals, industrial solutions and nutrition businesses. As a next step, the company is preparing the sale of its decorative paint business in Brazil, and is also looking for partnerships for its battery unit.
The company is considering a minority share sale for the agricultural unit, which is set to finalize its carveout in 2027. It now plans to convert large parts of its surface technologies division into standalone businesses, including units that provide coatings for the automotive industry as well surface treatment solutions.
The company also set new mid-term financial targets for 2028, eyeing a return on capital of around 10% and earnings of €10 billion to €12 billion before interest, taxes, depreciation, appreciation and special items. In 2023, adjusted earnings were €7.7 billion.
--With assistance from William Wilkes.
(Updates with details on plant closures in sixth paragraph.)
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