BASF pursues dividend savings and considers partial IPO as an option.
The foremost chemical company, BASF, is making adjustments in its operations due to continuous economic instability. The corporation is looking to list a portion of their Agricultural Solutions division, which encompasses crop protection products and seeds, on the stock exchange after 2027. This division holds a dominant position in the agricultural market and boasts an abundance of upcoming innovations.
In the interim, BASF is slashing its dividend policy and reducing the payout amount. They've guaranteed a minimum dividend of 2.25 euros per share, effective for the current financial year. Previously, they had paid out 3.40 euros per share. The new minimum dividend falls below the estimates put forth by industry experts. It's worth noting that since 2014, when the dividend was 2.80 euros, it has either risen or remained steady year after year.
The expected annual dividend payout for the coming years will hover around two billion euros, with around eight billion euros distributed between 2025 and 2028. Share buybacks will supplement these dividend payments, but BASF hasn't provided a specific date for this. They mentioned that the program would kick off no later than 2027 and would amount to around four billion euros.
Enhancing the operating result
BASF has also laid out new financial targets: They anticipate an operating result (Ebitda) before special items to sit between 10 billion and 12 billion euros by 2028. For this current year, BASF predicts an outcome of 8 billion to 8.6 billion euros. In the previous year, it was just over seven billion euros. In 2022, the Ebitda reached nearly eleven billion euros. The collective free cash flow for 2025 to 2028 is expected to surpass 12 billion euros.
Their plans have yet to receive favorable reception from the stock market. In a generally stronger market, shares take a downturn. While the medium-term objectives align with market expectations, as per Jefferies, the dividend policy statements are underwhelming. The announced dividend payouts in conjunction with share buybacks suggest a consistent total payout in the coming years, which is unlikely to win approval from investors.
BASF's capital market day takes place mid-morning. The day prior to this, CEO Markus Kamieth already signaled the Agricultural Solutions division's intention to go public at an employee meeting. BASF believes the Agricultural Solutions division is undervalued and plans to conduct a partial IPO to augment the market value of their crop protection and seed business.
Kamieth offers reassurance in Ludwigshafen
Regarding the Coatings division, Kamieth stated that BASF is exploring strategic options. "This means that we are considering partnerships, for example in the form of joint venture solutions, or simply examining if someone else could potentially own this business and increase its value further."
BASF is grappling with cost pressures and high energy prices. Consequently, they've already initiated another billion-euro savings plan in February, involving layoffs and facility closures. Efforts to improve profitability are also underway at their largest production site in Ludwigshafen. They aim to achieve an additional billion euros in annual savings by the end of 2026. However, the exact number of jobs that will be affected in Ludwigshafen remains unclear.
Kamieth attempted to boost morale among Ludwigshafen workers, stating, "I haven't been this optimistic about Ludwigshafen in many years." He acknowledged that the facility is "competitive at its core," despite high costs.
The announced changes in BASF's dividend policy, including reducing the payout amount and guaranteeing a minimum dividend of 2.25 euros per share, have raised concerns among some investors regarding the company's share prices. Once BASF lists a portion of their Agricultural Solutions division on the stock exchange after 2027, investors may closely watch its share prices to see how the division's performance affects BASF's overall performance.
