By Ludwig Burger and Patricia Weiss
FRANKFURT (Reuters) -BASF 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.
However, "there is no intention to sell these businesses," CEO Martin Brudermueller said during an investor conference. He earlier said external investment partners could be taken on board to share the cost of expanding the battery business.
BASF has already made its catalytic converter business, which relies on combustion-engine powered cars, a standalone subsidiary, which it said in October there were no current plans to sell.
BASF's shares rose as much as 2% before paring gains to close 1.4% higher at 45 euros each.
Other industrial groups in Germany, including ThyssenKrupp, have pursued separation moves, which are typically welcomed by investors who often prefer to buy shares in pure-play companies.
Bayer (OTC:BAYRY), 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 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, although he said management had assured him this was not the case.
The revamp comes as Brudermueller gets ready to retire from BASF in April 2024 to become non-executive chairman of Mercedes Benz (ETR:MBGn). 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.
VERBUND
Unlike major rivals such as Dow and Dupont, 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.
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.
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.
"The likelihood is that at least 2024 will be another difficult year," Brudermueller said.
Europe's largest chemical company also said that it would stop providing a sales outlook from January, and would guide for earnings before interest, taxes, depreciation and amortisation (EBITDA) before special items rather than EBIT.
BASF's Agricultural Solutions unit had 10.3 billion euros in sales last year, competing with Bayer, Corteva (NYSE:CTVA) and China's Syngenta, while revenue at the coatings business was 4.2 billion euros, selling mainly to carmakers and repair shops.
Battery materials and related recycling business units generated sales of more than 1 billion but, along with a new chemical complex in Zhanjiang in southern China, it is one of the areas where BASF invests the most.
On China, Brudermueller said clients are starting to restock, "still soft, but definitely a big step forward".