BASF Group’s 2022 financial report shows sales increased 11.1 per cent to €87.3 billion over the previous corresponding period, while EBIT before special items dropped 11.5 per cent to €6.9 billion. Cash flows from operating activities were €7.7 billion, an increase of 6.4 per cent, with free cash flow reducing 10.2 per cent to €3.3 billion. The Group proposed a dividend of €3.40 per share, the same as 2021.
According to BASF, the Group showed resilience in the 2022 business year in a challenging market environment dominated by the consequences of the war in Ukraine and particularly by increased raw material and energy prices.
Sales growth was mainly driven by higher prices across almost all segments due to an increase in raw materials and energy prices, with the materials and chemicals segments implementing the highest price increases. Significantly lower volumes overall dampened sales growth, with volumes development primarily driven by lower sales volumes in the surface technologies and chemicals segments.
The reduction in EBIT before special items was attributed to a strong decline in earnings contributions from the chemicals and materials segments. Both segments recorded lower margins and volumes as well as higher fixed costs. EBIT before special items rose in all other segments.
Special items in EBIT amounted to minus €330 million in 2022 compared with minus €91 million in the previous year.
The surface technologies segment recorded considerably higher earnings, especially due to increased earnings contributions from the automotive catalysts and battery materials businesses. Higher prices and volumes in the coatings division additionally supported the segment’s earnings performance.
In 2022, BASF’s operational earnings were burdened by additional energy costs of €3.2 billion globally. Europe accounted for around 84 per cent of this increase, which mostly impacted the Verbund site in Ludwigshafen, Germany. Higher natural gas costs accounted for 69 per cent of the overall increase in energy costs globally.
In the fourth quarter of 2022, BASF sales decreased by 2.3 per cent to €19.3 billion, mainly due to lower volumes. Fourth-quarter EBIT before special items fell by 69.6 per cent to €373 million compared with the prior-year quarter.
Cash flows from operating activities improved by €1.1 billion to €4.5 billion in the fourth quarter of 2022, while free cash flow increased by €749 million to €2.6 billion.
Regarding it’s 2023 outlook, BASF said the high level of uncertainty created by 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, negatively impacting global demand.
The Group therefore expects moderate growth of 1.6 per cent for the global economy in 2023 (2022: three per cent) and expects to generate sales of between €84 billion and €87 billion in 2023. EBIT before special items is expected to decline to between €4.8 billion and €5.4 billion. The company also 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 his presentation, Dr Martin Brudermueller, Chairman of the Board of Executive Directors, announced cost saving measures focused on Europe and measures to adapt production structures at the Verbund site, with annual cost savings of more than €500 million expected by the end of 2024.
“Europe’s competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and, in particular, high costs for most production input factors,” said Brudermueller. “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.”