FRANKFURT (Reuters) – BASF is to reduce annual costs by 500 million euros ($485 million) in Europe up to 2024, including job cuts, as the German chemicals group took a 740 million euro writedown linked to the Nord Stream 1 pipeline.
The company said in an unscheduled statement on Wednesday it would also look into restructuring its chemical sites further in the region over the longer term after being hit by high energy prices.
BASF cited significantly weaker earnings in Europe due to “deteriorating framework conditions” and a loss in Germany in the third quarter as reasons for the cutbacks.
The group said its third-quarter net income was below market expectations due to the 740 million euro writedown linked to the Nord Stream 1 gas pipeline.
Quarterly net income was 909 million euros, down from 1.25 billion euros a year earlier and considerably below the average analyst estimate of 1.105 billion,
The writedown relates to BASF’s shareholding in oil and gas business Wintershall Dea and its participation in the operator of the Nord Stream 1 pipeline, BASF said.
Germany’s heavy industry has been hit hard by surging energy costs due to the war in Ukraine and the reduced deliveries of Russian gas to Europe in the wake of the conflict, putting overseas rivals at a cost advantage.
German Economy Minister Robert Habeck said on Wednesday that the nation’s economy would shrink 0.4% in 2023 compared with the 2.5% growth previously forecast, blaming an economic war waged by Russia’s President Vladimir Putin.
BASF, which is due to publish detailed results on Oct. 26, said global third-quarter sales and operating income before special items came in slightly higher than analysts had expected, buoyed by a strong U.S. dollar.
More than half of BASF’s near-term cost cuts will be carried out at its Ludwigshafen headquarters, hitting non-production areas such as services, research and development as well as the corporate centre.
A BASF spokesperson said job cuts would be part of the efficiency drive, declining to give a number. Forced redundancies are ruled out at Ludwigshafen until the end of 2025 due to an existing agreement with shop stewards, the spokesperson added.
The company said in its statement that employee representatives would be involved in the measures.
($1 = 1.0320 euros)