BASF Slashes Dividend, Plans Portfolio Shake-Up in Strategy Shift — Update

By Helena Smolak

BASF cut its annual dividend and opened the door to shedding noncore assets, including a potential listing of its agricultural-chemicals business, as part of the German chemicals giant's new strategy.

The company aims to boost earnings and cash generation over the next four years through lower investments and cost savings, after weak demand and high expenses took a toll on profitability in recent quarters.

BASF's earnings fell under pressure as economic growth slowed in China and Europe as the company was trying to leave behind the hit from Russia's invasion of Ukraine, which triggered big swings in energy and raw-material costs and forced it to book big writedowns on its assets in Russia.

Five months after taking the helm, Chief Executive Markus Kamieth on Thursday laid out plans to sharpen BASF's focus on its core operations and said the company would look at options for businesses it considers noncore, which include its battery materials, coatings and environmental catalyst and metal solutions segments as well as its agricultural unit.

BASF aims to complete a legal and resource-planning separation of its agricultural unit that produces seeds, herbicides and fungicides by 2027. The move could pave the way for a potential initial public offering of the business, with the listing of a minority share as an option in the medium term, it said.

The company plans to launch a process to sell its Brazil decorative paints unit and to look for collaborations for its battery materials business as well that has been hurting from a slowdown in electric-vehicle demand, it said. BASF expects to receive a cash inflow of about 2 billion euros ($2.23 billion) from a recently completed exit from the oil and gas business.

In addition to its portfolio adjustments, BASF said it plans to pay out an annual dividend of at least 2.25 euros a share between 2025 and 2028, which compares with the 3.40 euros a share it paid for 2023. It foresees an aggregate dividend payment of around 8 billion euros in the four-year period, while buybacks are expected to amount to around 4 billion euros.

The company expects its earnings before interest and taxes, depreciation and amortization before special items--the company's preferred key metric--to range from 10 billion to 12 billion euros in 2028. In 2023, BASF reported an Ebitda before special items of 7.67 billion euros.

It projects a cumulative free cash flow of more than 12 billion euros between 2025 and 2028. The company aims to bring down cap expenditures below depreciation from 2026 onward, after a complex it is building in China begins operations, it said.

At its flagship Ludwigshafen site in Germany, where BASF has embarked on a cost-cutting plan to regain competitiveness, the company said it is evaluating additional measures given that some plants and production lines aren't delivering sufficient earnings.

Write to Helena Smolak at helena.smolak@wsj.com

(END) Dow Jones Newswires

September 26, 2024 06:28 ET (10:28 GMT)

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