BASF announces strategy to boost growth but keep emissions flat

BASF has outlined a strategy to outpace average global chemical sales while stagnating emissions.

“BASF commits to keeping its greenhouse gas emissions flat at the 2018 level until 2030 – even though we are targeting considerable annual production growth,” company chairman Martin Brudermüller said as he unveiled the new strategy in Germany earlier today.

The chemicals major is targeting an annual increase in earnings before tax (EBITDA) of 3–5%. This is down from the 8% average increase it has achieved since 2012, against the backdrop of a 3.7% annual growth in global chemicals demand.

“We want to grow stronger than the market, and we aim to grow our sales volumes above global chemical production growth,” said CFO Hans-Ulrich Engel.

More Verbund

To achieve these targets, BASF will increase its development of highly integrated facilities – known as Verbund plants, which it claims already help make annual cost savings of at least €1bn (US$1.14bn) on raw materials and energy. In July, BASF signed an MOU for a US$10bn Verbund chemicals site in Guangdong, China.

The strategy calls for improvements in management, efficiency and integration of its plants and it will purchase a greater share of electricity from renewable sources.

“Given the already very high technological standards at our plants, this is a very ambitious goal that will require exceptional creativity to do things differently,” said Brudermüller. It has reduced its greenhouse gas emissions by 50% in absolute terms compared to 1990 levels while doubling production volumes. Further savings will require that governments across the world provide what the company describes as a suitable regulatory environment.

Outpacing and matching peers

Technology has a key role to play too. BASF’s staff are already using augmented reality to bolster operations and the company has installed its own supercomputer to help improve research. It says digitalisation will continue to boost growth and efficiency, for example allowing it to simulate processes or investment ideas, and is aiming to digitalise processes at more than 350 of its plants by 2022. This effort, it says, will help the company “stay ahead of its peers in the chemical industry”.

It is making organisational changes too, expanding its current four business segments to six, in a move designed to match its businesses against those of its competitors. While it will focus primarily on organic growth through capital expenditure and innovation, it will also make acquisitions where necessary. Staff will also be reorganised, with some 20,000 staff – including those in research – expected to be directly or indirectly affected. The reorganisation will include embedding significant parts of its functional services into operating divisions, to bring employees close to customers.

“Our main emphasis will be on designing processes to be efficient and reliable. Businesses where we cannot achieve such a position will eventually be exited,” said Brudermüller.