BASF’s Twin-Track Strategy: Record China Sales Mask Ludwigshafen Pain as Agribusiness Spin-Off Looms

BASF posts €2.36B adjusted operating profit, plans agricultural spin-off by 2027, and cuts 2,800 jobs amid Asia-led demand surge.

The first quarter at BASF tells two very different stories. On one side, the German chemicals giant is riding a wave of pricing power and a China-led demand surge that has pushed its stock to a fresh 52-week high. On the other, the company is deep in the throes of a painful restructuring, cutting thousands of jobs in its historic Ludwigshafen home while preparing to spin off its agricultural arm into a standalone entity.

Shareholders gathering in Mannheim on Thursday are being asked to approve a fundamental shift in the group’s structure. The Agricultural Solutions division is set to be transferred into a separate subsidiary, a move that paves the way for a Frankfurt initial public offering targeted for 2027. From May, the unit will operate fully independently of its parent, with current segment head Livio Tedeschi taking the helm of the new company. Analysts view the separation as a logical step, arguing that agrochemicals and specialty chemicals follow vastly different market cycles and regulatory regimes, and that a split will allow each business to respond more nimbly to its own environment.

The numbers for the opening quarter underscore the complexity of the moment. Revenue dipped slightly to around €16 billion, weighed down by currency effects and pricing pressure. Adjusted operating profit came in at €2.36 billion, comfortably ahead of market consensus. Net income jumped to €927 million, boosted by a state guarantee payment related to the Russian Wintershall Dea assets and the sale of Harbour Energy stakes. CFO Dirk Elvermann noted that without foreign-exchange headwinds, the group would have matched last year’s operating profit exactly.

The real engine of growth, however, is Asia. BASF’s China business posted a 25% revenue increase in the first quarter, driven by solid volume growth. The company’s massive new integrated site in Zhanjiang, though still running at a slight loss, is designed to serve the local Chinese market and reduce reliance on exports. Meanwhile, the Middle East conflict has created an unexpected tailwind: customers, fearing supply disruptions, have been stockpiling inventory, and BASF’s Ludwigshafen plastics production — which depends little on Gulf oil imports — is well placed to meet that demand at higher prices. The full effect of those price adjustments is expected to materialise in the spring.

Back in Europe, the picture is starkly different. While BASF continues to pump €1.5 billion annually into its flagship Ludwigshafen site, it has already cut 2,800 jobs since the start of 2024. Administrative functions in HR, finance and IT are being progressively shifted to India. The group’s cost-saving programme is targeting €2.3 billion in annual savings by the end of 2026, a target that underpins the current outlook.

The company is sticking to its full-year forecast of adjusted operating profit of up to €7 billion, though the guidance rests on a notable assumption: a Brent crude price of $65 per barrel, while the benchmark is currently trading above $125. That disconnect has prompted caution among analysts. UBS has left its price target at €52, while mwb research flags cyclical downside risks in the second half.

For the past financial year, management is proposing an unchanged dividend of €2.25 per share. A multi-billion-euro share buyback programme is also under way, with nearly €789 million in stock already repurchased by mid-March.

Investors have so far taken the mixed signals in their stride. BASF shares hit a new year-to-date high of €54.74 on Thursday, extending gains since January to over 22%. The stock was trading little changed at around €54.08, holding near its recent peak. The market appears to be betting that the restructuring, combined with the agribusiness spin-off, will ultimately unlock value — even as the operational reality in Ludwigshafen remains a drag.