Chemicals giant blames plummeting earnings on high gas prices

The world’s largest chemical producer, BASF, has attributed its weak third quarter earnings to surging gas prices in the EU. The company said that it was seeking to achieve long-term cost cuts at its European sites.

The German multinational, which produces a wide range of products, from basic petrochemicals to fertilizers and glues, said it will move ahead with a cost-saving plan to counteract sluggish growth, high energy costs, and over-regulation.

“These challenging framework conditions in Europe endanger the international competitiveness of European producers and force us to adapt our cost structures as quickly as possible and also permanently,” the company’s CEO Martin Brudermueller said in a statement on Wednesday, adding that spot gas prices were five to six times higher than in the US.

From January to September, the European sites of the chemical giant absorbed additional costs of about €2.2 billion ($2.2 billion). The facilities include the company’s largest complex at Ludwigshafen in southwest Germany, where it makes everything from vitamins, foam chemicals and engineering plastics to pesticides.

BASF said earlier this month it was launching a cost-saving program that will be in place through the end of 2024. The plan targets annual savings of €500 million, or about 10% of costs , and will entail job cuts. The company said it would also look into further restructuring its chemical sites in the region over the longer term given the high energy prices.

On Wednesday, the company posted third quarter results with revenue before taxes decreasing by €538 million ($539 million) year-on-year to €1.2 billion ($1.2 billion). Net income declined by €344 million ($344 million) compared with the same period in 2021 to €909 million ($911 million).

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