Feb. 27, 2023
BASF Group has shown resilience in the 2022 business year in a challenging market environment that was dominated by the consequences of the war in Ukraine and in particular by increased raw material and energy prices. As Dr. Martin Brudermüller, Chairman of the Board of Executive Directors, and Dr. Hans-Ulrich Engel, Chief Financial Officer, explained during the presentation of the figures for 2022, BASF increased sales by 11.1 percent to €87.3 billion. Sales growth was mainly driven by higher prices across almost all segments due to an increase in raw materials and energy prices.
The Agricultural Solutions segment increased EBIT before special items considerably, in particular as a result of the positive sales performance due to increases in volumes and prices.
Agricultural Solutions Segment Business Review
In the Agricultural Solutions segment, BASF aims to further strengthen its market position as an integrated provider. BASF offers comprises seeds and seed treatment products, as well as fungicides, herbicides, insecticides and biological solutions, complemented by digital farming solutions to help farmers achieve a better yield. BASF’s strategy is based on innovation-driven organic growth and targeted portfolio expansion through acquisitions. Customer needs, societal expectations and reducing environmental impacts are what motivate BASF to innovate.
Products and applications
Tirexor® is a new type of PPO (protoporphyrinogen oxidase) inhibitor herbicide specifically designed to control resistant weeds, including those resistant to other PPO inhibitors. To date, herbicide resistance has been discovered in 21 of the 31 herbicide sites of action1 available to growers worldwide. Tirexor® has successfully been launched in Australia and Canada and is currently in the registration process in other major markets. The herbicide contributes to the success of corn, soy and wheat farming and has an expected peak sales potential2 for conventional uses in the low three-digit million euro range. Its value is expected to grow substantially with the launch of PPO herbicide tolerant crops.
1 International herbicide-resistant weed database
2 Peak sales are the highest sales value to be expected from one year. For more information, see the Glossary
Sales to third parties in the Agricultural Solutions segment were €10,280 million in 2022, €2,118 million above the previous year. Higher prices in all regions contributed most to the positive development. Sales growth was also driven by exchange rate effects and higher volumes.
In Europe, sales rose by €302 million year on year to €2,430 million. This was mainly due to significantly higher price levels. Sales development was supported by strong volume growth, especially in fungicides and herbicides, while negative currency effects, mainly from the Turkish lira, had a dampening effect.
In North America, sales rose by €922 million to €4,007 million. This was primarily driven by significantly higher prices and positive currency effects. Sales were also boosted by higher herbicide volumes in particular.
Sales in Asia amounted to €1,130 million, an increase of €172 million compared with the previous year. This was mainly due to higher volumes, especially of herbicides. Sales were also positively impacted by currency effects and significantly higher price levels.
Sales in the region South America, Africa, Middle East amounted to €2,712 million, €722 million above the previous year, and were driven by significantly higher prices and positive currency effects, both primarily in Brazil. Slightly higher volumes, especially for herbicides and seed treatment products, also contributed to the positive development.
At €1,220 million, income from operations (EBIT) before special items was €505 million above the 2021 figure. The increase was primarily due to strong sales growth. This more than compensated for increased raw materials and energy prices and higher fixed costs.
EBIT amounted to €1,221 million, €525 million higher than in the previous year.
Outlook for 2023 for the BASF Group
The high level of uncertainty that arose over the course of 2022 due to the war in Ukraine, high raw materials and energy costs in Europe, rising prices and interest rates, inflation and the development of the coronavirus pandemic will continue in 2023. All of these factors will negatively impact global demand. BASF thus only expects moderate growth of 1.6 percent for the global economy in 2023 (2022: 3.0 percent). For global chemical production, BASF expects growth of 2.0 percent (2022: 2.2 percent).
Based on these assumptions, the BASF Group is expected to generate sales of between €84 billion and €87 billion in 2023. The BASF Group’s EBIT before special items is expected to decline to between €4.8 billion and €5.4 billion. The company expects a weak first half of 2023 followed by an improved earnings environment in the second half of the year due to recovery effects, especially in China.
In the Agricultural Solutions segment, BASF expects slight sales growth in 2023. This will be mainly driven by higher prices while demand for agrochemicals and seeds will remain on a continuously high level. Based on the sales increase and a positive margin development, BASF is forecasting slightly higher EBIT before special items.
BASF specifies measures to save costs in Europe and to adapt Verbund structures in Ludwigshafen
In 2022, BASF Group’s operational earnings were burdened by additional energy costs of €3.2 billion globally. Europe accounted for around 84 percent of this increase, which mostly impacted the Verbund site in Ludwigshafen. Higher natural gas costs accounted for 69 percent of the overall increase in energy costs globally.
In his presentation, Martin Brudermüller also announced concrete cost savings measures focused on Europe as well as measures to adapt the production structures at the Verbund site in Ludwigshafen. ″Europe’s competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and in particular, high costs for most production input factors,″ said Brudermüller. ″All this has already hampered market growth in Europe in comparison with other regions. High energy prices are now putting an additional burden on profitability and competitiveness in Europe.″
Adaptations to the Verbund structures in Ludwigshafen are expected to lower fixed costs by over €200 million annually by the end of 2026. The structural changes will also lead to a significant reduction in the power and natural gas demand at the Ludwigshafen site. Consequently, CO2 emissions in Ludwigshafen will be reduced by around 0.9 million metric tons per year. This corresponds to a reduction of around 4 percent in BASF’s global CO2 emissions.
″We want to develop Ludwigshafen into the leading low-emission chemical production site in Europe,″ said Brudermüller. BASF aims to secure greater supplies of renewable energy for the Ludwigshafen site. The company plans to make use of heat pumps and cleaner ways of generating steam. In addition, new CO2-free technologies, such as water electrolysis to produce hydrogen are to be implemented.
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