BASF SE (IW 1000/39) is prepared to further cut operations in Asia, with a goal of eliminating 250 million euros (US$281 million) in costs, as competition with local companies and a slowdown in demand hurt profits, said board member Sanjeev Gandhi.
“We are restructuring and downsizing in mature Asia, where there is a need,” Gandhi, who heads BASF operations in Asia, said in London following a strategy presentation. “It’s an ongoing, case-by-case activity. Whatever makes sense we keep; whatever isn’t competitive we divest or shut down.”
BASF has had to abandon a target for 25 billion euros in sales by 2020 amid a downturn in the region, struggles against local rivals and overcapacity in some markets. It’s now looking only to outpace the regional growth rate, with Gandhi steering BASF toward Asia’s faster-growing markets such as Vietnam, where demand for chemicals used in farming, textiles and motorbikes is booming.
After years of joint ventures with western companies to gain expertise, China’s chemical industry is challenging in markets globally with planned deals like China National Chemical Corp.’s $43 billion purchase of Swiss agrochemical maker Syngenta AG. Ludwigshafen, Germany-based BASF, which entered China more than 130 years ago selling dyes, plans to concede markets where it doesn’t have a competitive advantage through innovation or technology, and step up partnerships in China, Gandhi said.
The German chemical maker already closed a dispersions unit in Australia amid a slowdown in the mining industry and downsized a head office in Singapore, Gandhi said. Other measures have been on Gandhi’s doorstep: BASF now occupies just four floors of its downtown Hong Kong office overlooking the sea and mountains, down from six, and employees share desks to make maximum use of remaining seats when people are traveling.
“It was too expensive, so we we have to be more reasonable and tighten our belts,” Gandhi said. “All of us have to squeeze a bit and get a little more intimate.”
By Andrew Noël