BASF slashes dividend amid worsening German industrial gloom

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BASF, the world’s largest chemicals group, has slashed its dividend by a third, plans to cut capital expenditure and is preparing to partially list its agricultural unit as it battles its worst crisis in years.

The group’s woes, caused by a sharp increase in energy prices since the start of Russia’s full-blown invasion of Ukraine, add to wider gloom in German industry.

Companies including Volkswagen, Thyssenkrupp and Continental are coming to terms with the biggest industrial upheaval in Europe’s largest economy in a generation. Shares of carmaker Mercedes-Benz tumbled 7 per cent last week after the company cut its profit outlook.

Shares of BASF have already lost a third of their value since the start of the war in Ukraine and were trading at their lowest level in August since the shortlived stock market crash at the start of the Covid-19 pandemic in early 2020.

Ahead of a capital markets day, BASF warned investors on Thursday that it would pay a dividend of “at least €2.25 per share” in 2024 and the following three years, having previously promised to keep payouts to shareholders at last year’s level of €3.40.

Analysts had expected such payouts for 2024 and were anticipating slight increases over the next two years, according to a poll published by the company.

Chief executive Markus Kamieth told employees on an internal call that the company was preparing a partial listing of its agricultural business, according to Reuters, arguing that the stock market was currently underestimating the unit’s earnings prospects.

A person familiar with the plans told the Financial Times that further details would be made public on Thursday. The agricultural unit, which produces herbicides, fungicides and seeds for farmers, generates €10bn in annual sales and accounts for 15 per cent of BASF’s total revenue.

According to Reuters, which had access to a recording of the internal BASF call, Kamieth also said management would consider strategic options including a sale of its coatings business, which counts Germany’s struggling carmakers among its most important clients.

Despite its current crisis, BASF promised to pay a total of €12bn to shareholders by 2028, two-thirds in dividends and the remainder in share buybacks, adding that it expected its free cash flow to exceed payouts over that period.

From 2026, when its giant new Chinese chemicals plant in Zhanjiang is scheduled to be operational, it will cut capital expenditure “well below depreciation”, it said.