Breaking: BASF Cuts Dividend as German Industrial Outlook Darkens – What This Means for Investors

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1. BASF, the global powerhouse in the chemical industry, has recently announced significant changes in response to its current crisis, triggered by soaring energy prices amidst Russia’s invasion of Ukraine. Here are the key developments:
   • Reduced dividend by a third
   • Planned capital expenditure cuts
   • Preparation for the partial listing of its agricultural unit
2. Amidst BASF’s struggles, a sense of despondency looms over the entire German industry, with companies like Volkswagen, Thyssenkrupp, and Continental grappling with the most substantial industrial shakeup in decades. Notably, Mercedes-Benz witnessed a 7% drop in shares after revising its profit forecast, reflecting the turbulent times faced by German enterprises.

3. The impact on BASF’s stock performance is evident, with shares plummeting by a third since the commencement of the Ukrainian conflict, reaching their lowest point since the initial market plunge at the onset of the Covid-19 pandemic in early 2020.

4. Providing a glimpse into BASF’s future strategy, Chief Executive Markus Kamieth revealed plans for the upcoming years, including:

   • Dividend assurance of at least €2.25 per share from 2024 onwards
   • Deliberate evaluation of a partial listing of the agricultural business, which contributes 15% to the company’s revenue through its distribution of herbicides, fungicides, and seeds
5. Additionally, strategic decisions might involve contemplating the sale of the coatings business, vital for Germany’s struggling automotive giants. Despite the turbulent phase, BASF remains committed to distributing a total of €12bn to its shareholders by 2028, ensuring sustained investor confidence through dividends and share repurchases.

6. Looking ahead, BASF envisages a promising future post-2026, leveraging the operational capabilities of its forthcoming mega chemicals plant in Zhanjiang, China, to optimize capital expenditure below depreciation levels. The company’s robust free cash flow projections further underline its commitment to long-term growth and stability in the face of adversity.

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