By Helena Smolak

BASF expects earnings to increase slightly this year due to cost savings that will offset continued investment in a big petrochemical site in China and a tough economic environment.

The German chemical giant is seeking to slash cuts and shed noncore assets to counter subdued demand in China and Europe. The company plans to approach the market to explore options for its remaining coatings activities by June after it sold its Brazilian paints business to Sherwin-Williams earlier this month.

It aims to have its agricultural unit ready for an initial public offering in 2027, but Chief Financial Officer Dirk Elvermann said in a media call that the company hasn't yet decided on the size of the IPO, pending market conditions and anticipated high market interest.

BASF expects its earnings before interest, taxes, depreciation, amortization and special items--its preferred key metric--to grow to between 8.0 billion and 8.4 billion euros ($8.32 billion-$8.73 billion) this year from 7.86 billion euros in 2024. This assumes a moderate increase in demand with all segments contributing to earnings growth except its chemicals business, the company said.

The guidance depends on how margins will recover over the course of the year, especially in the upstream business, Chief Executive Markus Kamieth said in an analyst call. "We believe that this is not overly ambitious, but it is realistic and also takes into account the uncertainties we currently have in the market."

The CEO expects limited tailwinds. "Most improvements we aim to achieve will need to be driven by our own efforts," he said.

The DAX company said it is on track to meet its cost-saving target of 2.1 billion euros annually by the end of 2026. It saved around 1 billion euros by the end of last year and plans to make another 1.5 billion euros in cuts in 2025.

BASF said spending on a complex it is building in China will hit its earnings by about 400 million euros this year, although investment peaked last year.

Its free cash flow is expected between 400 million euros and 800 million euros. The metric came in at 748 million euros last year, down from 2.7 billion euros in 2023.

The company said it would propose a dividend of 2.25 euros a share for 2024, down from 3.40 euros the year before. Kamieth stopped the previous policy of a continuously rising dividend as a result of the savings program announced in September.

As disclosed last month, full-year sales fell 5.2% to 65.26 billion euros amid competition-driven price decreases and currency effects. Net profit rose to 1.30 billion euros from 225 million euros, mainly due to the sale of Wintershall Dea assets to Harbour Energy.

Shares were up 1.8% in European midday trading.

Write to Helena Smolak at helena.smolak@wsj.com

(END) Dow Jones Newswires

February 28, 2025 07:27 ET (12:27 GMT)

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