BASF Intensifies Austerity Drive Amid Challenging Market Conditions

BASF escalates savings target to €2.3B, cuts jobs and capex, and maintains dividend despite weak 2025 results and cautious 2026 forecast.

The German chemical giant BASF has announced a significant escalation of its cost-cutting initiatives, exceeding its original savings targets. Confronted with a persistently weak operating environment, the company now aims to reduce costs by €2.3 billion, a substantial increase from its previous goal of €1.6 billion. CEO Markus Kamieth indicated that a meaningful market recovery is not anticipated for 2026, prompting these more aggressive measures.

Financial Performance and Cautious Guidance

BASF's 2025 fiscal year proved difficult. Earnings before interest, taxes, depreciation, and amortization (EBITDA) before special items fell by 9.5% to €6.6 billion. Adjusted earnings before interest and taxes (EBIT) saw a more pronounced decline of 18.1%. Group sales receded to just under €60 billion.

Looking ahead, management's EBITDA forecast for 2026 sits between €6.2 billion and €7.0 billion. The lower end of this range falls notably short of analyst consensus estimates, which had hovered around €7 billion. Kamieth attributed this prudent outlook to ongoing market uncertainties, citing a lack of visible signs for either an economic upturn or a reduction in geopolitical tensions.

Deep Cuts to Workforce, Capex, and Operations

To shore up profitability, BASF is implementing a radical austerity program across multiple fronts. The enhanced savings target of €2.3 billion is set for achievement by the end of 2026. Since late 2023, the company has already eliminated 4,800 positions, with further reductions planned in administrative and IT functions. Additionally, BASF is relocating certain operations to lower-cost hubs in India and Malaysia.

Concurrently, the group is slashing its capital expenditure (capex) for the 2026-2029 period by one-fifth, reducing planned investments to €13 billion. These combined actions are designed to stabilize free cash flow, which disappointed at €1.34 billion in 2025.

Dividend Commitment Amid Cash Flow Strain

Despite operational headwinds, BASF's board remains committed to its shareholder payout. The dividend will be maintained at €2.25 per share, resulting in a total distribution of approximately €2 billion. This payout notably exceeds the free cash flow generated last year, highlighting the financial pressure on the company as it bridges the gap from other resources.

Strategic Portfolio Reshaping Continues

The company is steadily advancing its strategic transformation. The divestment of its optical brighteners business to Catexel was finalized in late February. Furthermore, the coatings division is slated for sale in the second quarter. Preparations are also underway for a potential initial public offering (IPO) of its agricultural chemicals unit by 2027.

In parallel, BASF is executing a share buyback program authorized for up to €1.5 billion, with an expiration date of June 30, 2026. The company repurchased roughly 673,000 of its own shares in the final week of February alone. Since the program's launch in November 2025, a total of 14 million shares have been acquired.

Divergent Views from Market Experts

Equity researchers are divided in their assessment of BASF's stock. Early March saw Berenberg upgrade its recommendation from "Sell" to "Hold." In contrast, J.P. Morgan maintains a "Sell" stance. Goldman Sachs adopts a more bullish view, issuing a "Buy" rating based on perceived upside potential.

Shareholders will gather for the Annual General Meeting in Mannheim on April 30, 2026. The focus will likely extend beyond the dividend declaration to scrutinize the progress of the extensive savings and restructuring plan, and whether management can deliver on its revised expectations.