BASF Tightens the Screws: Cost Target Raised to €2.3 Billion as Coatings Sale Nears

BASF slashes savings target to €2.3B, prepares €5.8B Coatings sale to Carlyle, and plans 2027 agribusiness IPO amid geopolitical risks and a solid Q1.

The chemicals giant is pulling multiple levers at once — slashing costs, preparing a blockbuster IPO, and banking a massive cash injection — as it navigates one of the most turbulent periods in its recent history. BASF shares have already climbed to a three-year high, but the road ahead remains fraught with both opportunity and risk.

A Deeper Bite at Costs

Management has raised its annual savings target to €2.3 billion, up from previous goals, as persistently high energy costs, overcapacity, and a European recession force a more aggressive response. The IT division, which employs around 8,500 people, is bearing the brunt of the latest cuts, with significant job reductions planned to streamline internal operations.

This is not a standalone move. Over the past two years, BASF has already eliminated roughly 4,800 positions globally, and the senior management layer has been trimmed by 11%. At the Ludwigshafen headquarters alone, some 2,800 roles have been shed recently. The cost savings achieved so far total €1.7 billion, comfortably exceeding the original interim target.

Cash Windfall from Coatings

A major liquidity event is on the horizon. The sale of the Coatings division to private equity firm Carlyle is expected to funnel around €5.8 billion (pre-tax) into BASF’s coffers during the second quarter. This influx will significantly bolster the balance sheet and underpin ongoing shareholder returns.

The current share buyback programme is also nearing completion. By mid-March, the company had already repurchased shares worth nearly €789 million. The existing tranche, capped at €1.5 billion, is slated to finish by the end of June.

Agribusiness IPO on the Horizon

In a separate but equally consequential move, BASF is preparing to float its Agricultural Solutions segment on the Frankfurt Stock Exchange in 2027. The agribusiness unit must first navigate a regulatory hurdle: the EU is banning the herbicide flufenacet from the end of 2026. The company is positioning a new active ingredient, Luximo, as the replacement to safeguard future crop protection revenues.

The group is also shedding non-core assets. The sale of 4,400 company-owned apartments has already been agreed.

Solid Start to the Year

Despite the challenging backdrop, first-quarter numbers offered some reassurance. Currency effects dragged revenue down to around €16 billion, while operating profit before special items slipped to €2.35 billion. However, net income rose to €927 million, helped by the accelerated cost-cutting.

The stock closed at €54.74 on the Thursday before the holiday, a modest gain on the day. Deutsche Bank analysts described the results as a sign of stability, maintaining their "Buy" rating with a €55 price target. A dividend of €2.25 per share — solid by industry standards — continues to underpin the stock.

Geopolitical Clouds Gather

The outlook is not without its dark spots. Conflicts in the Middle East and the near-blockade of the Strait of Hormuz are disrupting global supply chains for oil and chemicals. The company says it cannot yet quantify the financial impact of these disruptions.

Management is sticking to its full-year guidance: operating profit in a range of €6.2 billion to €7.0 billion, and free cash flow of up to €2.3 billion. CEO Markus Kamieth has called 2025 a transition year, with a meaningful economic recovery not expected until the second half. Early signs of a bottom — such as stable petrochemical margins, also flagged by competitors for the spring — should provide some financial breathing room in the interim.

For shareholders, the immediate calendar is clear. The stock goes ex-dividend on 4 May, with the €2.25 per share payout arriving two days later.