Dea gives up business in Russia
Moscow’s war ruins BASF’s balance sheet – high loss
01/17/2023, 8:38 p.m
The chemical group BASF reports deep red numbers for the past year. The reason for this is high energy prices and write-downs on holdings in the Wintershall Dea group. He feels compelled to cut ties to Russia.
Last year, billions in write-downs on its stake in the oil and gas group Wintershall Dea pushed BASF deep into the red. The chemical company made an after-tax loss of almost 1.4 billion euros after a surplus of more than 5.5 billion euros the year before, as the DAX company announced on the basis of preliminary figures. On average, analysts had expected a profit of around 4.8 billion euros, even if the company had already posted high write-downs on Wintershall Dea over the course of the year.
In the fourth quarter, however, further value adjustments of 5.4 billion euros were incurred, as Wintershall Dea is now planning a complete withdrawal from its business in Russia. All in all, depreciation amounted to around 7.3 billion euros. Wintershall Dea was formed in 2019 from the merger of BASF subsidiary Wintershall and rival Dea. BASF still holds 72.7 percent of the joint venture, the rest is held by the former Dea owner LetterOne.
Because of the war in Ukraine, Wintershall Dea recently continued to distance itself from its business in Russia and announced that it was examining a legal separation. The company is involved in three production projects at the Yuzhno Russkoye natural gas field and the Achimov formation of the Urengoy field in Siberia. The share of the Russian business in the total production was recently 50 percent.
“Joint ventures were expropriated”
“Continuing our business in Russia is not sustainable,” said Wintershall Dea boss Mario Mehren. “In recent months, the Russian government has restricted the activities of Western companies in the country. In addition, external interference in the activities of our joint ventures has meant that Wintershall Dea cannot operate in Russia as before. The joint ventures were de facto economically expropriated .” The company’s write-downs also related to its stake in Nord Stream AG, the operator of the damaged Nord Stream 1 gas pipeline.
Overall, however, BASF took around eleven percent more last year, at EUR 87.3 billion, thereby achieving its forecast. However, the adjusted operating result (EBIT) fell by a good eleven percent to around 6.9 billion euros and was therefore at the lower end of the forecast range. Analysts had expected a little more.
BASF boss Martin Brudermüller had already announced a new austerity program in October, after rising energy and raw material costs had caused earnings to collapse in the third quarter. There was even a loss in the German business. The energy-intensive chemical industry was hit hard by the exploding energy prices last year. As the largest industrial gas consumer in Germany, they put BASF under particular pressure.
The group wants to present the complete set of figures on February 24th.