Cost Savings Program

Further program with additional annual cost savings of €1 billion in Ludwigshafen by the end of 2026

¹Run-rate by year end

²The figures include the cost savings program in non-production units with focus on Europe, measures in the Global Business Services and Global Digital Services units outside of Europe and the cost savings related to the adaptation of production structures at Ludwigshafen Verbund site.

In October 2022, BASF was one of the first chemical companies to initiate a significant cost savings program to address the deteriorating competitiveness in Europe and Germany in particular. This was done mainly in view of the significant increases in electricity and natural gas prices. As a next step, one year ago, in February 2023, we launched a set of measures to save costs in non-production areas in Europe and to adapt production structures at the Ludwigshafen site. As confirmed in our third quarter 2023 reporting, total annual cost savings from all measures announced to date are expected to reach €1.1 billion by the end of 2026. At the end of 2023, we already achieved an annual cost reduction run rate of around €0.6 billion from these measures. One-time costs amounted to around €0.4 billion in 2023.

In the course of 2023, earnings at our largest production site in Ludwigshafen deteriorated further in an extremely weak market environment. There are two main reasons for this:

First, the temporary low-demand environment, which is affecting the volume development in both our upstream and our downstream businesses.
And second, higher production costs due to structurally higher energy prices, which predominantly burden our upstream businesses.

To restore and defend our international competitiveness, we must rigorously address these new market realities. Therefore, we have decided to introduce additional measures to adapt the cost structures at our Ludwigshafen site.

We aim to reduce costs annually by a further €1 billion by the end of 2026. The program will generate sustainable cost savings in both production as well as non-production areas. It will include further reductions in fixed costs by driving efficiency in company structures, adapting production capacities to market needs and significantly trimming variable costs by redesigning processes and when awarding external service contracts.

The measures already announced in October 2022 and February 2023 will achieve another €500 million in annual cost savings by the end of 2026. The total one-time costs for these measures as well as the additional program are expected to be up to €1.8 billion.