© Reuters.
By Geoffrey Smith
Investing.com — Shares of BASF (ETR:) fell to their lowest level in eight weeks on Friday after the German chemical giant followed through on threats to cut thousands of jobs in response to huge losses caused by the the increase in energy last year.
Europe’s largest chemical company said it will cut 2,600 jobs worldwide, including 700 at its Ludwigshafen headquarters, after losing 4.85 billion euros (1 euro = $1.0588) last year, mainly due to the rising energy prices and canceling their huge investments in Russia. .
In a stark illustration of the damage caused by the war to Europe’s industrial base, BASF said on Friday that it will close one of its two ammonia plants in Ludwigshafen, along with associated fertilizer production operations. It will also stop manufacturing sodium carbonate, as well as cyclohexanol and cyclohexanone, two basic components in the production of artificial fabrics, paints and varnishes.
BASF’s fuel bill increased by 3.2 billion euros last year as the company was forced to seek alternative sources of gas at record prices. In Ludwigshafen alone, BASF ended up paying €1.4bn more for gas in 2022 than in 2021, despite reducing its consumption by 35%.
The group had already warned that rising energy prices had severely damaged the global competitiveness of its sites in Germany. They had benefited for years from cheap and reliable natural gas from Russia that they used both as fuel and feedstock for their organic chemistry operations.
The group’s net loss was much higher than the group had reported in January, due in part to its decision to write off the Russian assets of its upstream subsidiary Wintershall Dea, costing it 6.5 billion euros. Some 4.7 billion euros of that hit the income statement.
Earnings before interest and tax almost dried up in the fourth quarter, falling 90% to 119 million euros. Revenues fell 2.3%, as a 15% drop in sales volumes was partially offset by a 9.2% increase in average prices. The results were also favored by a tailwind of 4.5% in the exchange rate, which reflects the weakness against the dollar.
For the current year, BASF said it expects sales to fall around 2% to a range of around 85.5 billion euros, while earnings before interest and tax will fall more than 20% to around 5.1 billion euros.
The group was also a shareholder in the consortia that built the two Nord Stream gas pipelines, which were destroyed last summer after Russia unilaterally halted gas supplies to Germany in an effort to pressure Europe to agree to its Ukraine targets.
Despite the write-offs, the company maintained its dividend proposal at 3.40 euros per share. That did not stop the share price from falling 6.9% at 04:30 ET (09:30 GMT) to its lowest level since early January.
