BASF Launches Initiative
BASF Launches Operational Excellence Program; To Reduce Capital Expenditures
(RTTNews.com) – German chemical giant BASF SE (BFA.L, BASFY.PK) Monday announced a further operational excellence program called DrivE – Drive Efficiency, which would run from 2016 to 2018. It targets an annual earnings contribution of 1 billion euros by the end of 2018.
The company will bring down capital expenditures to levels slightly above depreciation in the coming years.
BASF said it is well on track with its 'We create chemistry' strategy despite a challenging environment. "We are growing BASF with the goal of making it even more profitable," said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF, at the BASF Investor Day 2015 in Ludwigshafen.
BASF expects chemical production to continue to grow well above global GDP until 2020. However, the business environment has changed since the company introduced its "We create chemistry" strategy in 2011, it added.
Major markets did not grow as fast as expected, and the oil price has been unpredictable. Further, geopolitics have contributed to higher volatility.
As a result, BASF has slightly adjusted its expectations for the global economic environment from 2015 to 2020, and sees growth of gross domestic product of 3 percent, instead of the previous 3.2 percent.
Growth in industrial production is seen at 3.5 percent, compared to the previous projection of 3.7 percent. Expectation for growth in chemical production has been adjusted to 3.9 percent from 4 percent.
This year, BASF will achieve its target of generating 10 billion euros of sales with products and solutions that have been on the market since 2010. BASF aims to maintain its R&D spending at around 3 percent of sales excluding Oil & Gas.
Further, the firm said it would add new specialty and solutions businesses through its innovation pipeline as well as acquisitions. The company will also continue to look for better owners of businesses that only provide a low strategic fit.
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