BASF Report 2023

Letter from the Chairman of the Board of Executive Directors

Dear Shareholder,

At BASF, we are accustomed to working under pressure – and not just in our plants. The year 2023 once again required enormous effort on our part, as the entire chemical industry is in upheaval. Our markets, our competitors and the needs of our customers are changing rapidly. The world is still experiencing geopolitical conflicts, weak economic growth and high interest rates due to ongoing inflation. In Europe, structurally higher energy price levels, extremely sluggish growth and overregulation are especially challenging for the competitiveness of local European producers. This difficult environment is demanding everything from us and is reflected in our figures.

However, we accept these challenges. We are taking action to maintain our competitiveness, especially in Germany. We want to grow profitably worldwide and become climate-neutral. We worked hard on this in 2023. I am convinced: We will succeed in all these areas because we are a strong company. We have the will to change and a concrete plan, which we are systematically implementing. And we will emerge even stronger from these tough times, just as we have done repeatedly over our 158-year history.

Clear focus on strengthening competitiveness and profitability

BASF supplies products and services to around 78,000 customers from various sectors in almost every country in the world. We want to further strengthen these relationships and win new customers too. The operating environment has changed significantly in recent years for our Battery Materials, Coatings and Agricultural Solutions businesses. Our competitors in these sectors are making a more focused push into the market and are thus increasingly challenging us. At the same time, these business areas are not integrated so deeply into the BASF Verbund. That is why we will be giving them more space – so they can tailor their business models and processes more precisely to the needs of their customers and perform even more successfully on the market. Despite these changes, BASF remains an integrated company with a broad portfolio. Particularly in a year such as 2023, this structure proved its value once again. The Coatings and Agricultural Solutions divisions generated record earnings, which partly offset weak results in other segments.

We have the will to change and a concrete plan.

In Germany in particular, we are working systematically on our competitiveness and profitability. We are reducing our costs by adapting our production structures, among other measures. We acted promptly, but we must not let up. Given the extremely difficult market environment and structural challenges, we need targeted measures at our site in Ludwigshafen in particular to make it fit for the future. And we will continue to be under enormous pressure here owing to the weak demand compared with other regions, high energy prices and increasingly far-reaching regulatory requirements. This is why we are implementing changes where we need to. We are altering where it makes us better. But we are also investing where we see opportunities.

Focus on future industries and growth markets

Our strategy is to produce locally for local markets. We want to be close to our customers, and we focus on innovation-driven growth areas. In 2023, we opened Europe’s first colocated center for battery material production and battery recycling in Schwarzheide, Germany. We are the first global producer of battery materials with production in all three core markets: Europe, the United States and Asia. In Geismar, Louisiana, the expansion of our MDI plant is well underway. This enables us to serve the growing demand from our North American customers in industries such as construction, automotive and furniture. And construction at our new Verbund site in Zhanjiang, China, is proceeding at an impressive pace on a site the size of 550 soccer fields. This project is fully on schedule and on budget.

We are altering where it makes us better and investing where we see opportunities.

As we decided in 2018, we will be divesting the oil and gas business. At the end of 2023, BASF, LetterOne and Harbour Energy signed an advantageous agreement to combine the businesses of Wintershall Dea and Harbour Energy. It is planned to transfer the exploration and production business, excluding Russia-related activities, to the publicly listed firm Harbour Energy in the fourth quarter of 2024.

Pioneer on the path to climate neutrality

By 2050, we aim to achieve net-zero CO2 emissions for our production (Scope 1) and our energy purchases (Scope 2). Despite the difficult economic times, we are firmly committed to this ambitious goal. I am excited and proud to see how the entire BASF team is pulling together to make this a reality. We are changing how we produce. With new electrified technologies, such as the world’s first electrically heated steam cracker furnace, we are testing what is possible. We are transitioning our energy supply from grey to green. Whether through investments in wind farms, solar parks or green electricity contracts, we already meet 20% of our electricity demand from renewable sources. By 2030, this proportion should rise to at least 60% worldwide – even though our demand for electricity is growing. We are getting ever closer to this target. We officially inaugurated the offshore wind farm Hollandse Kust Zuid in the Dutch North Sea in 2023. This is an incredible success! And we are already pursuing two other major wind farms: in the German North Sea and off the coast of Zhanjiang in China.

I am excited to see how the entire BASF team is pulling together.

Moreover, we have committed to reducing the greenhouse gas emissions from raw materials purchased from our suppliers. By 2030, we intend to reduce our specific Scope 3.1 emissions by 15% compared with 2022. In the future, we want to source raw materials with a smaller carbon footprint than today’s level from our suppliers.

Furthermore, we are steadily expanding our portfolio of low-emission products. As part of this, we are also advancing the circular economy. With loopamid®, BASF launched a solution for greater circularity in the textile industry in early 2024. Textile waste is recycled as a valuable raw material to produce polyamide 6. This idea strikes a chord with our customers: Fashion company Zara recently presented a jacket made entirely of recycled polyamide. All its components – from the fabrics and filling to the hook-and-loop fastener and zipper – are made of loopamid®, so the garment is also 100% recyclable. This is a fantastic achievement!

Framework conditions remain difficult

All these successes cannot hide the fact that 2023 was an economically tough year for BASF. We did not reach our targets or meet analyst estimates for sales and income from operations (EBIT) before special items. Our sales in 2023 amounted to €68.9 billion (2022: €87.3 billion), a decrease of around 21% versus the prior year. The downward sales trend was driven by significantly lower prices and volumes, while currency effects also had a dampening effect on sales. EBIT before special items declined to €3.8 billion (2022: €6.9 billion). This year-on-year decline of nearly 45% resulted from lower margins due to decreased sales. These could not be offset by the reduction in fixed costs we achieved.

Yet, a glance at our figures also shows that we are working effectively on our cost base. We considerably reduced our inventory levels and achieved a strong cash flow from operating activities. BASF therefore continues to have a high equity ratio and a strong balance sheet. This is all good news for you, dear shareholders. It is our goal to increase our dividend per share each year, or at least maintain it at the previous year’s level. We will therefore propose a dividend of €3.40 per share, matching the prior-year level, to the Annual Shareholders’ Meeting in April 2024. Based on the 2023 year-end share price of €48.78, the BASF share again offers a high dividend yield of 7.0%.

BASF continues to have a high equity ratio and a strong balance sheet.

The framework conditions will remain difficult in 2024. We expect the subdued momentum in the global economy seen in 2023 to continue into the first half of 2024. Global economic growth will likely only pick up slightly as the year progresses.

Positive change requires a team effort

For the chemical industry, Europe will continue to be the most challenging market due to its low growth and structurally higher energy prices compared with other regions. In addition, there are increasingly far-reaching regulatory requirements. BASF and large parts of our customer industries are drowning in this sea of red tape. Nevertheless, I remain an optimist! We can successfully maintain and strengthen our industrial basis in Europe if there is widespread willingness to embrace change among society, business and policymakers. But this will also require a new regulatory framework. One that promotes innovations for climate protection, enables the international competitiveness of new processes and accelerates the expansion of renewable energies at competitive prices. We need an “Industrial Deal” to again foster more entrepreneurship, creativity and profitable growth for the chemical industry and our customer industries in Europe.

Our colleagues are rethinking chemistry

At BASF, chemistry is our passion. At every site around the globe, our colleagues pursue this passion with dedication and creativity. They are rethinking chemistry every day, just like the three young employees shown on the cover of this report. I also joined BASF as a young person in 1988, and I have had the opportunity to help shape the development of our company in various roles – for the past six years as Chairman of the Board of Executive Directors. After 36 years at BASF, I will hand over the Chairmanship to Markus Kamieth following the Annual Shareholders’ Meeting on April 25, 2024. I am certain: The company is in great hands with him and the new Board team. I am honored to have spent my entire career devoting all my strength and passion to the prosperity and future of our BASF. I am proud of what we have changed and achieved together, in what were not easy times. From the bottom of my heart, I thank the entire BASF team for their drive, perseverance and motivation. And I thank you, dear shareholders, for your trust.


Martin Brudermüller

Steam cracker
A steam cracker is a plant in which steam is used to “crack” naphtha (petroleum) or natural gas. The resulting petrochemicals are the raw materials used to produce most of BASF’s products.

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