BASF bets on China to power growth

German chemicals giant BASF said on Tuesday that it would massively expand its operations in China, betting on steady growth in the world's second largest economy to lift profits in coming years. The group plans both to expand an existing site in Nanjing and build a new major factory in Zhanjiang in the south to profit from China's forecast rise to around 50 percent of the global chemicals market by 2030.
"We want to generate growth where growth is actually happening," chief executive Martin Brudermueller told journalists during a press conference at BASF's Ludwigshafen headquarters. After investing around 11 billion euros ($12.6 billion) in Nanjing, the group will pour around 10 billion euros into the new site, he added. BASF is "the only western chemical company with this kind of position in China," Brudermueller said.
As well as its investments in Asia, the group is pushing through an internal restructuring to simplify its business and aims in future to develop "tailor-made" products for its customers with a more responsive research and development operation. Executives hope their updated strategy should allow BASF to grow operating, or underlying profits before special items, by between 3.0 and 5.0 percent each year until 2030.
Meanwhile bosses strove to highlight their environmental credentials, promising to keep carbon dioxide emissions flat at 2018 levels until 2030 despite increasing production. So far BASF's CO2 output had been falling, to now stand at half 1990's figure, while production volumes doubled over the same period. But Brudermueller said that most of the reductions that could be found from improved processes within the company had already been achieved, calling the freezing target for the coming years "very ambitious".
In future, there are "some things we will not do anymore, because CO2 emissions are too high," he added. BASF also aims to increase use of recycled plastics as a raw material and to boost sales of products it says make a "substantial sustainability contribution" to 22 billion euros annually by 2025. Although the group promised to increase its dividend payout each year until 2030, investors appeared unimpressed with the group's plans.