Renowned German chemical manufacturer, BASF SE has recently announced plans to launch a program to enhance its annual earnings by $2.3 billion (2 billion euros) staring 2021, as a measure to counter slower profit growth compared with previous years.
As per an official statement, the company claims that the program, to bolster EBITDA (earnings before interest, taxes, depreciation, and amortization), will include measures focused on research and development, production, logistics, as well as on automation and digitalization activities and organizational development. BASF added that it was targeting an annual increase in EBITDA before special items of 3%-5%, without specifying a period. Analysts are reported to find the target disappointing as it is down from 8% annual growth on average since 2012.
A company spokesperson said that the program, dubbed ‘excellence’, would include cutting costs and growing company revenue. Reliable sources also cite that BASF’s new strategy, which only targets 3%-5% EBITDA growth per annum might prove to be inefficient.
However, Martin Brudermueller, Chief Executive, BASF, who took over in May 2018, was seen reaffirming his support for the group’s integrated supply chain of BASF-owned businesses throughout the production process, dubbed ‘Verbund’.
According to BASF, the Verbund will continue to play a key role for the company’s growth. BASF’s portfolio has unique benefits due to physical as well as technological, market-related, and digital Verbund advantage, it said.
For the record, in May 2018, CEO Brudermueller reportedly came out in favor of keeping divergent businesses folded into the company, at a time when its major rivals including DowDuPont were splitting their operations.
Incidentally, BASF, in addition to its revenue boosting program, also revealed plans to focus primarily on organic growth through investment and innovation with a focus on China, the world’s largest market for chemicals and plastics and make further acquisitions whenever necessary.
