BASF Group is hoping for a return to better market conditions in the remainder of 2023 following lower than expected sales across its global network.
The company reported a 24.7 per cent decline in sales to 17.3 billion Euros in its latest financial result for its operations in the second quarter of 2023.
It has also adjusted its outlook for the remainder of the year to come.
BASF chairman Dr Martin Brudermüller described it as a result of the tough market environment.
“We faced low demand from our key customer industries, except for automotive,” said Brudermüller said at a company release of the results.
The company reported the decline in sales was mainly driven by lower prices, primarily in the Chemicals, Surface Technologies and Materials segments.
Lower sales volumes as a result of weaker demand weighed down the sales performance in all segments.
Income from operations was €1.0 billion in the second quarter of 2023 below the figure of the prior-year period was €1.3 billion.
“Almost all segments contributed to this with significant declines in earnings, in particular the Chemicals and Materials segments, “ Brudermüller said.
“Surface Technologies achieved slight earnings growth.”
BASF announced in February that it would implement a number of measures to improve competitiveness including executing a cost-savings program with a focus on Europe.
“Together with the initiatives that were already underway in our global service units, we will reduce fixed costs by the end of 2026 so that they will then be around €1 billion lower annually,” BASF Group Chief Financial Officer Dr Dirk Elvermann said.
“By the end of 2023, BASF expects to achieve annual savings of more than €300 million from the cost savings program,” Elvermann said.
“In addition, we continuously and strictly control our fixed costs and avoid discretionary costs wherever possible. We have a sharper focus on cash management to optimize our free cash flow. Over the course of the year, we will continue to reduce our inventory levels.”
Brudermüller said while they expected some uplift in the latter half of the year they were measured in their expectation of any turnaround.
“We do not expect a further weakening in demand at the global level for the second half of 2023, as the inventories of chemical raw materials in most customer industries have already been greatly reduced,” Brudermüller said.
“However, we are assuming only a tentative recovery because we expect that global demand for consumer goods will grow slower than previously assumed. Margins are therefore expected to remain under pressure.”