Chemical Sector Check - BASF’s Manufacturing Focus Shifting Eastwards: Prabhudas Lilladher

Prabhudas Lilladher Report

We assess BASF management commentary and its actions to improve the group’s overall growth trajectory. While BASF’s Q4CY22 performance was impacted by European gas crisis and impairments on its shareholding in Wintershall Dea AG (Russian activities ceased), shutdown of few units in Ludwigshafen (BASF’s largest site) and rightsizing employee base is more to do with improving long term competitiveness.

Positive long term outlook reflects in increasing capex budget (increased to €28.8 billion for 2023-27 versus €25.5 billion in 2022-26), for which it readies a balanced global footprint with production assets close to customers in all regions.

Although BASF’s current eastward shift (Asia Pacific forms ~47% of its capex budget) is focused towards China; but Europe plus one beginning to materialise will also have long term benefits for Indian manufacturers, in our view.

We believe rising capex intensity augurs well for overall global chemicals sector including India, on the back of new opportunities (like battery chemicals) and newer growth centres (Asia).

Domestic players’ capex outlays and timelines have also remained unchanged despite near term demand challenges.

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