LUDWIGSHAFEN (dpa-AFX) - The withdrawal of subsidiary Wintershall Dea has left parent company BASF with a billion-dollar loss in 2022. In addition, the chemical company was increasingly affected by the significant rise in raw material and energy prices as a result of the Ukraine war last year. Although sales of the DAX-listed group increased for the year as a whole, operating profit fell significantly. BASF has already launched an austerity program due to deteriorating business and tougher conditions in Europe. What's going on at the company, what analysts are saying and what the stock is doing.


After business had still been round for BASF in the first half of the year, high raw material and energy costs are having an increasingly strong impact on the Ludwigshafen-based chemical company's business.

According to preliminary calculations, BASF was able to increase sales by eleven percent year-on-year to 87.3 billion euros in 2022 thanks to higher prices and favorable exchange rates. However, operating profit declined, with earnings before interest, taxes and special items (adjusted EBIT) falling by eleven percent to just under 6.9 billion euros.

Due to deteriorating business and more difficult conditions in Europe, particularly because of sharply higher gas prices, BASF's management already launched a drastic cost-cutting program last year, which is to be implemented between 2023 and 2024. The cuts are intended to reduce annual non-production costs by 500 million euros. The Board of Executive Directors wants to realize more than half of the savings at the Ludwigshafen site, where BASF employs around 39,000 of its approximately 111,000 employees worldwide.

BASF reported a bottom-line loss of almost 1.4 billion euros in 2022. This was mainly due to write-downs on Wintershall Dea of 7.3 billion euros, which amounted to 5.4 billion euros in the fourth quarter alone. In 2021, the group had still earned around 5.5 billion euros. The BASF subsidiary is complaining about a de facto expropriation of its holdings in Russia and is planning a complete withdrawal from the country.

Since the start of the Russian war against Ukraine, Wintershall Dea had come under criticism for holding on to its Russian business for a long time. Other energy companies such as Shell and Enel have been quicker to divest their business in the country.

Wintershall Dea CEO Mario Mehren had said as recently as November that while there was no new business there, "the only way to withdraw from Russia would be to give our activities to the Russian state." Assets in Russia amount to around 2.5 billion euros. The company had announced at the end of October that it was looking into a legal separation of the business. Most recently, about half of its oil and gas production came from Russia.

Then came the about-face at the beginning of the year: "Continuing our business in Russia is not viable," Mehren said. The war of aggression on Ukraine had destroyed cooperation between Russia and Europe. In addition, he said, the Russian government has restricted the activities of Western companies. "The joint ventures were de facto economically expropriated," he added.

The BASF subsidiary referred to Russian regulations from late December. These retroactively reduced the prices at which the joint ventures can sell their produced hydrocarbons to Russia's Gazprom.

Meanwhile, BASF still plans to list its majority stake Wintershall Dea on the stock market after announcing its withdrawal from Russia. "BASF stands by its strategic goal of selling its shares in Wintershall Dea AG," a spokesman said in response to a query. Accordingly, the company is still aiming for an IPO, he added.

Wintershall Dea had emerged from the merger of Wintershall Holding and Dea in 2019. BASF holds a good 70 percent of Wintershall Dea. The rest belongs to the investment company LetterOne. BASF had originally planned the IPO for the second half of 2020, but has since postponed it several times.

BASF plans to present its financial statements for 2022 on Feb. 24 and provide an outlook for the current year.


Of the 15 experts covered by dpa-AFX since the presentation of the figures in January, seven recommend buying the share. Five recommend holding, three recommend selling. The average target price is a good 55 euros. However, the estimates show a wide range of 40 to 68 euros. Most recently, the shares cost a good 51 euros.

Industry experts were disappointed by the business performance in the final quarter. The analysts did not expect a net loss for the full year, as BASF itself admitted.

Operating profit before special items missed market expectations by 17 percent in the final quarter of the year, wrote Andrew Stott of the major Swiss bank UBS. He said the Chemicals and Nutrition & Care divisions were mainly responsible. In the former division, BASF produces basic chemicals, and in the latter, among others, ingredients for consumer goods.

Analyst Chetan Udeshi of U.S. bank JPMorgan had also expected a higher operating result for the final quarter. The write-downs on the Russian business, however, were no surprise, he said.

Samuel Perry of the Swiss bank Credit Suisse and Markus Mayer of Baader Bank recently reduced their recommendations significantly. Perry downgraded BASF shares from "outperform" to "underperform" and lowered the price target to 46 euros. He does not expect a significant improvement in capacity utilization at BASF until at least fiscal 2024. Perry cut his operating earnings estimates by an average of 14 percent through 2024.

The Baader analyst downgraded BASF shares from "add" to "reduce," but raised the price target to 53 euros. According to Mayer, the high write-downs did not come out of the blue. Nevertheless, the amount is breathtaking, he said. There are also additional impairment risks that will depend on political decisions on subsidized industrial electricity prices in Europe, he said.

BASF has not yet released cash (cash flow) figures for 2022, but they are likely to be very good due to destocking, he said. According to Mayer, however, there is a big question mark regarding the dividend. From a cash flow perspective, there would be no problem paying the consensus forecast payout. However, with regard to the closure of plants in Europe and significant job cuts in Germany, it could be problematic to transfer an adequate amount to investors.

THAT'S WHAT THE SHARE IS DOING (price on Feb. 15, 2023, 3 p.m.):

The Corona crisis hit BASF shares hard during the first phase of the pandemic more than two years ago. The share price slid by more than 40 percent within a few weeks. In mid-March 2020, the share price was around 37.35 euros, the lowest since 2009. In the meantime, the price recovered significantly - to almost 73 euros in spring 2021.

But marked by the war in Ukraine, the corona lockdowns in China and problems in the supply chains, BASF's share price chart clouded over again significantly. With the fall to below the 40 euro mark last July, the share price again approached the Corona crash low - and after further ups and downs, it only just missed this mark at 37.90 euros at the end of October. Since then, the share price has been climbing again.

Although the share price has risen by around eleven percent since the turn of the year, it has still lost around a quarter of its value over the past twelve months. Shareholders also have little to be happy about in the medium term. Since its record high of 98.80 euros at the beginning of 2018, BASF's share price has almost halved. Most recently, one share cost around 51.50 euros.

Over a ten-year period, the shares have lost more than a quarter, while the Dax and the European sector index Stoxx 600 Chemicals have almost doubled in this period.

The Group's stock market value is currently 46 billion euros. This puts BASF in the midfield of the Dax. When Group CEO Martin Brudermüller took office in May 2018, BASF had still ranked sixth with approximately 80 billion euros./mne/tav/he