"The new strategy guides BASF on the road to growth." Dr. Martin Brudermueller, executive board chairman of BASF Europe, said at a new corporate strategy conference in Port Ludwig. He recalled the company's highlights in recent years: "Since 2012, our profit before interest, tax, depreciation and amortization of special items has increased by an average of 8% annually, significantly higher than the annual growth of fixed costs of 3%. Basf's profit growth is therefore faster than the 3.7% annual growth of global industrial production. In addition, the level of free cash flow has also been greatly developed in recent years, and in the near future achieved up to 15.4% of the returns on used capital. The primary goal of the new strategy is to achieve sales and sales growth.

BASF focuses on achieving organic growth in the business sector. In order to achieve this goal faster, BASF will focus more on customers and provide customized services and solutions. BASF will significantly simplify the architecture and process, optimize product mix, and further strengthen the Verbund system to become faster and more flexible. Bo Mule said: "We need to make organizational transformation, become more customer-centric and more agile."

The Asian market has become a key market for BASF, and it is also very important for realizing the company's growth strategy. China has become the world's largest chemical market, accounting for 40% of the total global market, and will continue to promote the growth of global industrial production. "By 2030, China's share of the global market will expand to nearly 50%, and BASF will have to grow with it," Bo said. We will build a new integrated base in Zhanjiang, Guangdong, and expand the base in Nanjing, which will significantly enhance our growth level in this dynamic market.

BASF sets ambitious financial and non-financial objectives

Basf's new strategy sets ambitious financial and non-financial targets. Dr. Hans-Ulrich Engel, Vice-Chairman and Chief Financial Officer of BASF Europe, said: "We are growing faster than the market, aiming to achieve higher sales and sales growth than the global level of industrial production."

BASF also hopes to further improve its profitability, aiming to increase the profit before interest, tax, depreciation and amortization of special items by 3 to 5 percentage points annually. "In addition, BASF aims to achieve a much higher rate of return on capital spent annually than the cost-to-capital ratio," Engel said. This means that we actually create added value.

BASF also wants to maintain its leading position in the eyes of investors and create value above the average level of the chemical industry. "Therefore, we want to maintain sufficient free cash flow and increase the dividend per share year by year," Engel said.

To achieve these ambitious goals, BASF is launching a new outstanding project, which will be implemented from 2019 to 2021. The target is to contribute 2 billion euros annually from the end of 2021. The project will include measures in the fields of production, logistics, R&D, digitization, automation and organizational development.

Basf has also set ambitious non-financial targets. "Even if we set a considerable annual production growth target, we are committed to maintaining global greenhouse gas emissions at 2018 levels until 2030," Bo said. This means that we are controlling the growth of carbon dioxide emissions while achieving organic growth. This goal covers major investment projects planned, such as the integrated production base to be established in Guangdong, China. To achieve this goal, BASF will improve its production base management process, improve efficiency, integrate resources, and, where possible, increase the proportion of renewable energy in the power supply. Bo Mule added: "Considering the high-tech level we already have in our production base, this is a challenging goal that must be achieved in a different way." He believes that this requires a suitable regulatory environment for Germany, Europe and the world. BASF has cut its greenhouse gas emissions by 50% from 1990 levels and doubled its capacity.

In addition to achieving the goal of keeping the total carbon dioxide emissions unchanged by 2030, BASF hopes to reach about 22 billion euros in sales of super-products by 2025. These products contribute significantly to the sustainable development of the value chain.

Bo Mule said: "Without our employees, all the goals can not be achieved. This is why we set the employee satisfaction index for the first time. We hope that more than 80% of employees think they can grow up in Basf and keep working at their best.

Key areas of work

"We want our customers to experience a brand new Basf," Bo said. Therefore, we will further adjust the organizational structure to make it more customer-centric and more efficient. We need to mobilize the enthusiasm of the whole company for customers and better meet their needs. By combining BASF's unique expertise in the chemical industry with its customers'expertise, we can develop better solutions that not only make profits but also benefit society. In order to achieve this goal, BASF is taking a series of measures to enhance customer transparency, improve customer service quality and explore common development potential. BASF will focus on the following areas: product mix, employees, innovation, sustainable development, operations and digitization.

Further Development of Business Domain Structure of BASF

BASF reviewed the business domain structure and will begin to make changes in early 2019. Bo Mule said: "We will optimize the product mix, so that our capital allocation is more focused on growth business. Basf's new business domain structure will make our business direction, the importance of value chain and the role of Verbund clearer and more transparent.

Since January 1, 2019, BASF will have six business areas, each of which contains two business sectors. Only the Agricultural Solutions Department will remain a separate business area:

Chemicals

Petroleum Chemicals and Intermediates

Materials

Characteristic materials, monomers

Industrial solutions

Dispersions, Pigments and Characteristic Chemicals

Surface treatment technology

Catalysts and Coatings

Nutrition and nursing

Nursing Chemicals, Nutrition and Health

Agricultural solutions

BASF will identify the market position of each business, define its competitive advantages, and establish a high-performance organization to adapt to different competitive environments.

BASF will focus on promoting internal organic growth through investment and innovation, and make appropriate M&A. Bo Mule said: "Our focus is to design efficient and reliable processes. Businesses that fail to reach their target position in the market will eventually withdraw.

Playing the Core Role of the Integration System

The integration system will continue to play a central role in the success of BASF. BASF's product portfolio has unique advantages by virtue of its integrated strength in physical, technological, market and digital aspects. The integration system can help the company to achieve technological advantages in all business areas. By providing a wide range of product portfolios, BASF provides effective customer support.

In addition, value chains can only operate effectively in an integrated system.

Because of the high concentration of production in the integrated system, BASF can save at least 1 billion euros a year in raw materials, energy and logistics. At the same time, the company can also avoid large emissions due to integrated production. Basf will continue to be the industry leader by building and developing an integrated system to achieve highly centralized production, operate fewer but more efficient bases.

Creating High Performance Organizations

In order to promote the successful transformation of BASF, the company is in the process of transformation.

Improve internal processes and optimize collaboration among staff.  Employees are the key to successful implementation of the new strategy.  BASF will provide a flexible organizational structure to ensure that employees have the necessary tools and skills to provide customers with differentiated and customized products and services. "We have to be faster and more flexible to achieve efficiency and efficiency," Engel said.

As part of the development of the organizational structure, BASF is building a more streamlined structure for R&D and other functional management departments. By embedding most of the functional services into the operation department, the distance between employees and customers can be shortened. In addition, the company can more effectively manage functions and research activities independent of the operation department. About 20,000 employees worldwide will be directly or indirectly affected by the restructuring. Engel said: "We hope that all these initiatives can better achieve the differentiated development of various business sectors, and greatly improve work efficiency."

When the time is ripe, more decision-making power will be transferred to the business sector. "This means more freedom of management and clearer responsibilities," Engel said. Basf will also improve customer satisfaction while improving the efficiency of various business departments. To ensure that BASF can seize potential market opportunities in every country, the company will introduce complementary market development models. Operating departments will decide which markets are the key markets, arrange their own teams to serve, and which markets will be authorized to operate for local organizational teams. Not only that, Basf has also set up a process simplification working group to focus on simplifying key processes. The company will simplify and shorten the process and speed up decision-making.

Innovative solutions to meet challenges

BASF has been committed to developing the most attractive innovative products for its customers. Bo Mule said: "We need to improve our competitiveness through excellent technology and first-class technology to provide customers with what they need." New strategic adjustments bring research teams closer to business and customer needs. Basf's research and development will not only become more closely organized, but also pay more attention to customer needs. This will help shorten the time to market and accelerate the organic growth of the company.

Leading Excellent Production and Operation

Excellent operation has always been one of the main advantages of BASF. Engel said: "Customers want us to deliver products according to specific requirements and time. To do this,

We must operate the production safely, efficiently and reliably. Basf will improve the reliability and flexibility of the device. As a result, BASF will increase its special budget to 400 million a year for improving excellence in operations. This is much higher than the average in recent years.

Promoting the digitization process of the whole company

Digitalization provides an unprecedented opportunity for the entire life cycle of BASF assets. For example, simulating different processes or investment ideas on a computer will help minimize costs. Augmented reality technology has also been used to support BASF employees in their daily operations. BASF aims to digitize more than 350 production facilities worldwide by 2022.

Digitalization will become an integral part of BASF's business. BASF will create additional value for customers, develop business and improve efficiency through digitalization. Digitalization will also enhance the creativity of R&D departments, especially when the supercomputer Quriosite is given more computing tasks, digitization will play a greater role. To ensure maximum value from data, BASF will further improve data availability and quality, provide the necessary infrastructure to connect back-end systems, and use existing data to support decision-making. BASF will speed up, deepen its influence and expand its scope in the process of digitization, thus leading its peers in the chemical industry.

Henry Disclaimer: What you see on Henry's website at present does not constitute an advertisement or is not used for commercial propaganda. Henry only delivers more information for free to users, not to mention making investment suggestions for you. We do not make any assurances or promises. Readers are requested to refer only and verify the relevant content by themselves. If you have doubts about the content, please contact us in time.