UpdateBASF to shrink in 2009, cut 1,500 jobs worldwide

26 February 2009 14:16  [Source: ICIS news]

(Recasts lead and updates throughout)

By Nigel Davis and Bohan Loh

LUDWIGSHAFEN, Germany (ICIS news)--BASF will shrink in 2009 as the company faces up to a year of "unprecedented challenges," its CEO said on Thursday as the German chemical giant reported heavy fourth quarter losses and announced at least 1,500 worldwide job cuts.

Earnings this year were expected to weaken as business conditions have not improved, the company said as it announced its 2008 fourth quarter and full year results. CEO Jurgen Hambrecht said that only the agrochemicals business was expected to grow.

“We have to face up to reality,” Hambrecht said at the group’s annual press conference. “BASF will shrink.”

He said: “Despite the acquisitions of Ciba and Revus Energy we expect a decline in sales compared with 2008 and an even greater decline in income from operations which will be negatively impacted by integration costs.”

BASF's  full-year operating profits before special items fell 10% year-on-year to about €6.9bn ($8.7bn) due to a sharp slump in demand for chemicals, but higher prices helped sales to rise 8% to €62.3bn. In the fourth quarter, the company incurred a net loss of €313m.

The company has proposed a dividend of €1.95 per share for 2008, the same amount it paid in 2007 before the 1:2 stock split in February last year, which Hambrecht labelled “ambitious”.

The acquisition of specialty chemicals maker Ciba would be followed by a thorough, and in some cases tough restructuring process, Hambrecht added.

The deal was expected to close by the end of the first quarter, with operational integration starting in the middle of the year. Ciba would largely be absorbed into the performance products segment and a new paper chemicals division.

The company said it was accelerating its existing efficiency and restructuring programs, and would close less profitable plants and also sites in order to maintain the company’s long-term competitiveness.

It said the restructuring program would apply to coatings sites in the US, Asia and Europe as well as plants for plastic precursors in Asia.

“Normally, such plants would be replaced by new capital expenditures. Now, BASF is closing them faster than originally planned,” the company said.

Hambrecht said demand for chemical products has not picked up since the start of 2009 after a dramatic drop in BASF’s global business in the fourth quarter of 2008.

“On the contrary, the situation in our sales markets is worsening, and inventory levels in the value chains are still too high. As a result, the chemical industry is continuing to shrink,” he said.

The company’s shares rose nearly 7% from Wednesday’s close at €22.53 (13:30 GMT).

($1 = €0.79)

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By: Nigel Davis
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