BASF gives agriculture, battery units more autonomy but no plan to split (updated)

VERBUND AG

07/12/2023 14:01

(Adds labour rep in paragraph 8, background on CEO in paras
10-11, outlook in final paragraph)
    By Ludwig Burger and Patricia Weiss
       FRANKFURT, Dec 7 (Reuters) - BASF  BASFn.DE  plans to
turn its agriculture, battery materials and coatings businesses
into autonomous units to try to boost earnings, a major revamp
for the German chemicals giant that has traditionally been
highly integrated.
    The company, with sales of 87 billion euros ($94 billion)
last year, will create legally separate entities for the three
units, trade union IGBCE said in a statement on Thursday, which
was confirmed by a company spokesperson. 
    Over the last two years, BASF has also made its catalytic
converter business, which relies on combustion-engine powered
cars, a standalone subsidiary ready for "strategic options".
    The company said in October that there were no current plans
to sell the catalyst unit and on Thursday said any sale of the
three additional units earmarked for separation was not on the
agenda.
    Still, CEO Martin Brudermueller said in a media call that
external investment partners could be taken on board to share
the cost of expanding the battery business.
    Other industrial groups in Germany, including ThyssenKrupp
 TKAG.DE , have pursued separation moves, which are typically
welcomed by investors who often prefer to buy shares in
pure-play companies.
    Bayer  BAYGn.DE , a rival maker of seeds and crop chemicals,
last month said it was considering breaking up its business to
improve a battered share price, while chemicals distributor
Brenntag  BNRGn.DE  will reorganise into two independent
divisions as it faces pressure from activist investors.
    "When something is separated, people draw their own
conclusions and expect a sale," the head of BASF's works
council, Sinischa Horvat, told Reuters.
    He said management had assured him this was not the case 
but it would have to earn the trust of staff. 
    The revamp comes as Brudermueller gets ready to retire from
BASF in April 2024 to become non-executive chairman of Mercedes
Benz  MBGn.DE . Markus Kamieth, in charge of BASF's Asian
operations and chief technology officer Melanie Maas-Brunner are
vying to succeed him, a person familiar with the matter has told
Reuters.  
    Unlike major rivals such as Dow  DOW.N  and Dupont  DD.N ,
BASF has traditionally relied on integrated chemical complexes
known as Verbund, producing most of its intermediate substances
in house to cut transportation and energy costs and utilise
by-products.
    "Businesses that are less deeply integrated into the Verbund
will gain more space to meet the needs of their specific
customer industries while keeping the benefits of an integrated
company," BASF said in a statement, calling it a "more
differentiated approach to steering individual businesses". 
    The union said close to 2,500 employees would be affected by
the overhaul at BASF's Ludwigshafen headquarters, or almost 10%
of staff at the site. 
    The Agricultural Solutions unit had 10.3 billion euros in
sales last year, competing with Bayer, Corteva  CTVA.N  and
China's Syngenta.
    Battery materials and related recycling business units
generated sales of more than 1 billion euros in 2022, but it is
one of two areas where BASF invests the most, the other being a
new chemical complex in Zhanjiang in southern China.
    The coatings business had 4.2 billion in revenue last year,
selling mainly to carmakers and repair shops. 
    Hit by a subdued European home market, BASF in October
mapped out further cost cuts, scaled back investment and said
2023 earnings and sales would be at the lower end of target
ranges due to an "extremely uncertain" global macroeconomic
outlook.  


 (Reporting by Ludwig Burger and Patricia Weiss
Editing by Miranda Murray, Kirsten Donovan)
 ((ludwig.burger@thomsonreuters.com; +49 30 220133634;))