BASF SE (BASFY) Q4 2025 Press Conference Call Transcript

Feb. 27, 2026 11:28 AM ETBASF SE (BASFY) Stock, BFFAF Stock

BASF SE (BASFY) Q4 2025 Press Conference Call February 27, 2026 4:30 AM EST

Company Participants

Andreas Meier
Markus Kamieth – CEO & Chairman of the Board of Executive Directors
Dirk Elvermann – Member of the Board of Executive Directors, CFO & Chief Digital Officer

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

[Interpreted] Thank you, Andreas. Good morning, and welcome to Ludwigshafen, and also to those in front of the monitors. First of all, thank you, Andreas, for you, for having taken over this job. You are doing this for the first time or have been doing this for the first time for a long time because Nina Schwab-Hautzinger left to join Roche, but you probably heard yesterday that we will welcome Thomas Biegi as successor of Nina Schwab-Hautzinger soon. And I think in future, he will take this job, but well, you will have to agree with him.

Dirk Elvermann and I will present and explain the most important figures and developments of the 2025 business year. 2025 marked by many geopolitical and headwinds in the world that unfortunately had a negative impact. Consequently, we, in the chemical industry, faced an uncertain and very volatile global market environment and with considerable headwinds. As previously stated, we, therefore, focus primarily on the things we can control within the framework of our Winning Ways strategy.

We successfully started up the major assets at our new Verbund site in Zhanjiang, and we also accelerated our cost savings programs and significantly streamlined BASF’s organization. Moreover, we progressed swiftly and successfully with the announced portfolio measures. But let me also mention that the year 2025 and particularly the fourth quarter did not develop as we had anticipated. Our prerelease on January 22 already gave you an indication of this.

Let’s now turn to the details of BASF’s financial performance in the fourth quarter of 2025, always compared with the prior year quarter. Overall, sales declined considerably because of strong currency headwinds and slightly lower prices. At the same time, we achieved slightly higher volumes. All segments reported volume growth, except for the Chemicals segment. Volumes rose particularly in Surface Technologies, Agricultural Solutions and Nutrition & Care segments.

From a regional perspective, we achieved a remarkable volume increase of 13% in China and posted solid growth in North America. In Europe, we recorded slightly lower sales volumes. Compared with the fourth quarter of 2024, prices declined in 5 of our 6 segments, most notably in Chemicals and Materials due to ongoing competitive pressure. We could only increase prices in the Surface Technologies segment, primarily owing to higher precious metal prices. Currency effects burdened sales in all divisions and were mainly caused by the strong depreciation of the U.S. dollar, the Chinese renminbi and Indian rupee. Portfolio effects slightly dampened sales growth, and this was mostly related to the sale of our Decorative Paints business.

Based on this underlying sales development, EBITDA before special items came in at EUR 1 billion compared with EUR 1.4 billion in the prior year quarter. Currency headwinds lowered EBITDA before special items in the fourth quarter of 2025 by around EUR 110 million. Ladies and gentlemen, overall, BASF Group’s EBITDA before special items reached EUR 6.6 billion in the full year of 2025. The decline compared with 2024 was mainly due to lower margins and negative currency effects, and the latter amounted to EUR 235 million in the full year 2025. Due to continued low market demand and pressure on margins, earnings in BASF’s core businesses, especially in the Chemicals segment, declined considerably. Higher contributions from BASF’s stand-alone businesses could only partially compensate for this decrease.

Let’s now turn to our portfolio measures. Our agreement with Carlyle marks an important milestone in realizing the full value of our Coatings business. Prior to that, we had divested our Decorative Paints business to Sherwin-Williams. Under Carlyle’s operational leadership, we want to continue to strengthen the leading position of the Coatings business. This will create further upside potential for the 40% equity share we will continue to hold after closing. We are on track to close the transaction in the second quarter, as previously announced. On the basis of the 2 transactions, BASF’s Coatings business is valued at an enterprise value of EUR 8.7 billion.

Let’s move on to Agricultural Solutions. Our team here once again delivered a very strong performance in 2025 and achieved an EBITDA margin before special items of 22%. We are on track to reach IPO readiness in 2027. Last year, excellent progress was made on the legal entity and ERP separation. By early 2027, the separation will be completed in all regions.

In November, we announced the future management Board for the Ag business. Its members combine extensive industry expertise with the required capital market experience. The management team headed by Livio Tedeschi will drive the transformation of Ag Solutions into an independently steered company focusing solely on the agricultural sector. The planned listing of our Agricultural Solutions business will mark the next decisive step to unlock additional value for our shareholders. The planned IPO is targeted to take place on the Frankfurt Stock Exchange.

And what is also good news is another piece of news. In January, we announced that BASF Agricultural Solutions is acquiring AgBiTech, a supplier of biological solutions to control insect pests. It has pioneered the use of nucleopolyhedrovirus technology to develop insect control solutions based on naturally occurring viruses. With operations in Brazil, the United States and Australia, AgBiTech serves farmers growing soybean, corn, and cotton as well as specialty crops. This acquisition is an important step in the value creation journey of Agricultural Solutions. The new technology will complement BASF’s existing biosolutions portfolio and underscores the commitment to a more sustainable, holistic approach in agriculture, in line with the business strategy of Ag Solutions. The transaction is expected to close in the first half of 2026.

From the stand-alone Ag business, let’s return to the beginnings of our value chain. We successfully started up all 32 key production lines at our Zhanjiang-Verbund site on time and below budget, a remarkable achievement and a testament to the capabilities of our teams. We also started up the steam cracker, the heart of the Verbund, without any lost time. This steam cracker is flexible, so we can use both naphtha and butane as feedstocks.

I was very pleased to hear Linde’s CEO, Sanjiv Lamba, describe this as one of the fastest cracker starts up ever. Linde supports us with their cracker technology and engineering expertise and contributed to this major achievement of our teams in Zhanjiang. The team executed this complex task with outstanding dedication and success. We are confident that we will operate the site at high utilization rates even in the current market environment. Nevertheless, I want to note that we expect a slightly negative earnings contribution from the Zhanjiang-Verbund site in the first year of operations, mainly due to start-up related costs. From 2027, we expect the site to contribute positive earnings.

Ladies and gentlemen, MDI is an important product for BASF and a key component of our polyurethane value chain. It is indispensable in the construction, automotive, coatings, adhesives and furniture sectors. Classic applications include rigid and flexible foams. It can be found as insulation and upholstery material in your car. For example, I think you’re not sitting on such a chair at the moment. In the United States, we are currently expanding our MDI plant in Geismar, Louisiana. The final phase is on track, and we are planning to start up production in the third quarter of 2026. At USD 1 billion in total, the project marks BASF’s largest investment ever in the United States. Through this expansion, we are doubling our MDI capacity in Geismar to around 600,000 metric tons per year to serve the growing U.S. market.

Dirk Elvermann
Member of the Board of Executive Directors, CFO & Chief Digital Officer

Ladies and gentlemen, where do we stand with BASF’s cost-saving programs? In a nutshell, we have accelerated the implementation. By the end of 2025, we already achieved a total annual cost reduction run rate of around EUR 1.7 billion, and this represents an increase of EUR 100 million compared with our original savings target for this date. In 2025, the associated onetime costs amounted to EUR 700 million, and this increase in onetime costs of around EUR 300 million was caused by higher provisions for severance payments. In contrast, the planned onetime costs for 2026 will be reduced from EUR 500 million to EUR 300 million. By the end of 2026, we now expect annual cost savings of EUR 2.3 billion instead of EUR 2.1 billion as planned. The cumulative onetime costs are now expected to amount to EUR 1.9 billion in total. And this shows our positive momentum in bringing down our cost base and our ongoing focus on this crucial topic that we are dedicated to.

On the right-hand side of this slide, you can see that between December 2023 and December 2025, we reduced the number of BASF senior executives by 11%. The number of employees decreased by 4,800 if we exclude the around 1,000 employees who were recruited at the Verbund site in China in the same period. This demonstrates that we are actively streamlining our global organization at all levels. In 2026, we will further advance in this direction.

We recently communicated our next steps to create more value, which will happen in BASF’s service organizations. And these are Global Digital Services and Global Business Services. Why are we doing this? Against the backdrop of our successful portfolio measures and the differentiation between core and stand-alone businesses, we now also want to streamline IT, finance and HR services to meet the needs of BASF’s core businesses. In Global Digital Services, we are rationalizing and harmonizing BASF’s IT application landscape and sharpening the Digital Service portfolio through consolidation and standardization. In this context, we plan to open a cost-efficient digital hub in Hyderabad, India. We will adjust our existing location footprint and take out significant costs.

Building on competitive service levels and focused digitalization, these measures allow us to capture efficiency gains and achieve a significant reduction in the Digital Services workforce. Similarly, in Global Business Services, we intend to streamline the service portfolio, drive automation and establish cost-efficient global hubs. We, therefore, aim to bundle a significant portion of our business services in 2 global hubs in Asia. At the new global hub in India, we intend to bundle services with a focus on finance and HR. And the established hub in Kuala Lumpur in Malaysia is foreseen to focus on global supply chain services in the future. Existing regional hubs will complement this setup.

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

[Interpreted] Thank you, Dirk. A key objective of our Winning Ways strategy is attractive shareholder distributions via dividends and share buybacks. That is why we will propose a dividend of EUR 2.25 per share for the 2025 business year to the Annual Shareholders’ Meeting. Based on the year-end share price, this represents an attractive dividend yield of 5.1%. The second pillar of our attractive shareholder distribution policy is our buyback program. In view of cash proceeds already received and further proceeds expected, particularly from portfolio measures, we started buying back shares in November 2025. By year-end 2025, we had repurchased shares of around EUR 355 million.

Moving on to our outlook for 2026. From today’s perspective, we do not expect a meaningful market upswing or a significant easing of geopolitical tensions in the near term. Our forecast for the BASF Group assumes that GDP growth will be slightly lower and that global industrial production growth will be significantly lower than the 2025 level. We expect a further decline in chemical production in the mature economies and weaker growth in the emerging markets.

Our planning is based on an average oil price of USD 65 per barrel of Brent crude and an exchange rate of $1.20 per euro. Based on these assumptions, we expect EBITDA before special items to be between EUR 6.2 billion and EUR 7 billion in 2026. BASF Group’s free cash flow is expected to be between EUR 1.5 billion and EUR 2.3 billion. Payments made for property, plant and equipment and intangible assets are estimated to be reduced to EUR 3.4 billion.

I’d like to add that from a market perspective, the start to the first quarter has been as challenging as expected. In January, volumes in China continued to develop very positively, which is partly related to the timing of the Chinese New Year. But in the remaining regions, volume development has been weak. Given the considerably stronger U.S. dollar in the prior year quarter, currency headwinds on EBITDA before special items could amount to up to EUR 200 million in the first quarter of 2026 alone. So 2026 is likely to be another transitional year with significant headwinds for our industry. Most of the improvements we aim to achieve will need to be driven by our own efforts. We expect a gradual recovery of market conditions in the later part of this year and in 2027 and see promising early indications. However, we are also mindful of short-term demand constraints due to geopolitical and trade-related effects.

Let me highlight 3 topics that we will continue to prioritize in 2026. We will continue to actively drive measures to structurally reduce costs by rigorously implementing our cost savings programs, and we will bring down CapEx significantly below the level of depreciation. In parallel, we will hunt for volumes to increase the utilization rates of our plants. And after the successful start-up of our new Verbund site in China, it’s now all about filling the asset’s increasing utilization rates. Based on our highly competitive cost position, we are confident that we will achieve this goal fairly quickly.

Furthermore, we will focus on the completion of the final phase of the MDI capacity expansion in Geismar to capture further profitable growth in North America. And we will build on our successful portfolio measures to crystallize and unlock the value of our stand-alone businesses. We will stay on course to further strengthen our core businesses by implementing the necessary measures.

In summary, delivering on our Winning Ways strategy means combining active portfolio steering with capital discipline and strong operational execution when it comes to CapEx and costs. And this way, we will create value for our company.

Bernd Freytag

[Interpreted] Regarding Ludwigshafen, one follow-up question. So what range is the loss? And what do you expect this year? Second question, Mr. Elvermann, when you ask tariffs to be back, how much have you paid here, to give us an idea? Mr. Kamieth, regarding the European chemicals policy in general. The EU with the critical chemical alliance would like to pick value chains which may be protected or are seen as worth to continue, may probably be subsidized. What are you hoping for here?

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

[Interpreted] Very complex questions. Let me start with chemicals, legislation, EU. Maybe you can take over then. Complicated issue, Mr. Freytag. Let me limit myself to Critical Chemicals Alliance. Otherwise, so many other topics will be added that are decided for us in Brussels. Critical Chemicals Alliance, developed from 2 different types of motivation. It’s an initiative by the EU Commission. On the one hand, the shock after corona, because we realized in many value chains, Europe is not in a robust situation. And if we don’t watch out, we will lose more value chains in Europe, and we will become even more dependent on other regions or even individual countries. Buzzword, rare earths. Buzzword, antibiotics. During COVID, it turned out, oh, it’s not a good thing to be in that weak situation in Europe.

Secondly, a short-term aspect, and that’s the import pressure that we experienced from the U.S. and from China regarding the chemical industry in Europe, because they put capacities in Europe under pressure. I say we caused this problem, of course, to a large extent, because competitiveness situation is very difficult here. So I welcome this approach. The industry, the EU Commission and many advisers want to sit down and discuss how can we come up with a regulatory framework to make sure that on the one hand, we maintain the European chemical industry. And on the other hand, we do away with the critical dependencies.

But I think we must not switch it in a way to come up with an island solution for Europe. We must not have a protectionist development in the chemical industry in Europe. That would be the wrong development. This is why we say we need a balanced approach where protection is necessary for reasons of resilience or, maybe in some cases, in a targeted way for competitive reasons. We are in favor. If it means that it will help, it’s okay. But if it continues with noncompetitive situations in Europe, we are against.

As a chemical industry in Europe, we don’t want to live in a zoo. We want to still live out in the wild. So my appeal to the EU Commission often is do not come up with too many specific aid packages, just make sure you take away the load from our shoulders, so that we can continue breathing. So that’s my approach here. But of course, I could spend hours discussing this.

Unknown Attendee

[Interpreted] Mr. Kamieth, in today’s press release, we read that last year, the Zhanjiang-Verbund site was started up successfully. It’s the third biggest production site of BASF globally. Why is BASF continuing to invest so much money in China? Looking at today’s uncertain times, how important is the Chinese market in the global strategic approach of BASF?

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

[Interpreted] Thank you for the question. Yes, you are right. In the fourth quarter, so with the highlight of the steam cracker very early in January, we, from our point of view, successfully started up the site. As I said, 32 production assets were started up within only 4 weeks. And I would say, looking at the complexity and the success, I’m only talking about the technical start-up, not the construction, which was also great. But to achieving this with such a quality, I think this is the first ever in the chemical industry. So great performance by the team. And this goes to show that this is what our workforce really, really is able to do. We are very proud of this.

Of course, this does not protect us against a very difficult market in China. I said, well, the market is growing. There is volume growth in China. However, prices are under enormous pressure because of high overcapacities in China. This does not only go for the chemical industry. In China, for 40 months in a row, we have producer price inflation. So this producer price inflation is not what the consumer sees, but what the producing industry sees, and there is a strong margin pressure because of this in all Chinese industry. But we think in the mid to long term, this will be a successful site for BASF because the strategic location is fine in South China, in the Guangdong Province, where the heart of Chinese growth is to be found, and we are very competitive.

China represents almost 54% of the global chemical market. We are at the right location, with the right assets, with a site which, especially within China, but also at global level is producing with a very, very low CO2 footprint. So strategically speaking, very good. Operationally, in the short term, more difficult than expected. But still, we are convinced that this was the right decision. Even though in ’26, 2027, the financial performance will be a little more difficult.

In China, we generate around 13% of group sales of the BASF Group. This will increase slightly with the new site to between 15% and 20% probably, but China will become more important for us. And you have to put it in perspective. I tend to compare this with the U.S. The U.S. will still be a much bigger, much more important market than China in future. Sometimes the press says, well, we are somewhat biased here, but we are not.

Tom Brown

Just a quick one to close off. In light of the bearish environment this year and the insolvencies we’ve seen in Germany, especially, like do you have a projection on how much capacity you expect to leave the European market? And just kind of building from that, looking at Ursula von der Leyen’s comments in Antwerp and the delays in EU Mercosur as well as the delays to funding for Ukraine, do you think there’s an argument for centralizing greater power in Europe at the Brussels level?

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

The second question, it’s a very fundamental question. I think if you would ask anybody in Europe, [indiscernible] form of the European Union and its constituents or processes, so to say, you would find a high vote. And I would say even people in the European Commission would say, yes, it would be needed because we are struggling with the 27 votes, 27 Unity votes on a lot of big decisions. But there’s also no easy answer. And I think, for me, it is not appropriate to now use the word like you used, centralization. It’s an oversimplification of what is needed.

Everybody wants to make Europe successful. We want to make Europe successful. We have to make Europe successful. I can only warn that especially parties that are making public noise around criticizing that the EU is maybe not good for Germany, that they don’t get, let’s say, too much airtime with their oversimplistic arguments, because Europe is good for us, Europe is good for European industry, Europe is good for most citizens in Europe, but we could use a more future-ready European Union, so to say, I would say. And I think there probably even Mrs. von der Leyen would subscribe to this. Your first question was on insolvencies…

Tom Brown

Yes, insolvencies…

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

I don’t know. We have published this — the Cefic has published this in January. You have maybe seen this if you were in Antwerp, that over the last 3, 4 years, already 9% of the European chemical capacity has been closed with a consequence that 90,000 jobs have already been — direct and indirect jobs have been affected. And if you look at the dynamics, we are not at the end. So there is more capacity that will be closed. There are insolvencies, there’s restructuring. And I would say there’s also delayed restructuring now with some asset sales that are happening in Europe.

So I would say the time of restructuring in the European chemical industry is not yet over from a BASF perspective. This is also something we feel is necessary. So that’s why I said earlier, a protectionism in Europe is not good for the industry, and it’s also not good for BASF, because to some extent, the overcapacity also in Europe has to be addressed. The overcapacity is not only in China, it’s also in Europe.

And noncompetitive assets have to also be restructured. And we believe that this actually is a source of relative competitive advantage for BASF, because we have, in Europe, very competitive assets. In sites like Ludwigshafen and Antwerp, with a high degree of integration, a low cost base in terms of asset cost and good energy integration will actually play out their relative advantage compared to many other chemical sites in Europe, smaller nonintegrated that will get into difficulties.

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