BASF’s Two-Speed Strategy: Pouring Millions Into Flavours While Shedding Billions in Paints

BASF starts up three aroma-chemical plants and advances its €7.7B coatings sale to Carlyle and QIA, while exceeding cost-saving targets with €2.3B goal.

The chemical giant is simultaneously firing up massive new aroma-chemical plants and finalising the sale of its coatings division, as it navigates a cost-cutting drive that has already overshot its original targets.

Three large-scale production units for flavour and fragrance ingredients came on stream in April 2026 — two at BASF’s Ludwigshafen headquarters and one at its integrated site in Zhanjiang, China. The Ludwigshafen facilities will ramp up output of menthol and linalool, compounds found in everything from toothpaste to laundry detergents, while the Chinese plant is dedicated to citral, a key intermediate that will feed both local demand and downstream production back in Germany. The groundwork for the projects was laid in June 2023, and the company confirmed that all three units are now delivering specification-grade material.

Katja Scharpwinkel, the board member overseeing the investment, described the start-up as “a clear commitment to the Ludwigshafen site”. Around 60 new jobs are being created there. Steffen Goetz, the divisional head, stressed that the “world-scale” plants would bolster supply security for global customers.

The timing of the capacity expansion is striking. BASF is in the midst of a group-wide austerity push that has already exceeded expectations: by the end of last year, the company had locked in annual savings of €1.7 billion, ahead of schedule. The target has now been raised to €2.3 billion by the end of 2026. Yet the group continues to earmark roughly €2 billion a year for investment in its home base, signalling that aroma chemicals remain core to its long-term ambitions.

On the divestiture front, the planned sale of BASF’s coatings business is gathering pace. A banking syndicate has lined up around $1.4 billion in loans and a separate €750 million tranche to back the acquisition by private equity firm Carlyle and the Qatar Investment Authority. The enterprise value of the deal stands at €7.7 billion, with BASF expecting pre-tax proceeds of nearly €5.8 billion once the transaction closes in the second quarter. The Ludwigshafen group will retain a 40% stake in the business.

Meanwhile, the company is also exploring the sale of roughly 3,300 company-owned apartments held by its subsidiary BASF Wohnen + Bauen. Bids were due by 28 April 2026, with a final agreement targeted for early 2027.

Investors have so far rewarded the strategic overhaul. BASF shares changed hands at around €54.44 on Tuesday, just shy of their 52-week high of €54.70. The stock has gained roughly 22% since the start of the year. Barclays, however, remains unconvinced. Analyst Katie Richards maintains an “underweight” rating with a price target of €40, citing persistent pricing pressure across the chemicals sector as the primary risk.

The next major test comes on Thursday, when BASF releases its first-quarter results. The numbers will land just hours before the annual general meeting in Mannheim, where shareholders are due to vote on a proposed dividend of €2.25 per share and the planned spin-off of the agricultural chemicals division. The company has also been running a share buyback programme of up to €1.5 billion.

The earnings report will offer the first real indication of whether the new aroma-chemical capacity is already feeding through to margins, and how effectively price increases are offsetting the currency headwinds from a weak US dollar. BASF’s full-year guidance calls for EBITDA in a range of €6.2 billion to €7.0 billion, with subdued demand from the automotive and construction sectors acting as a brake on growth.