BASF's North American Business Increases Cost Savings by $150 Million
October 25 2005 - 10:15AM
PR Newswire (US)
Company Also Expects EBIT Improvements of $200 Million by 2007
FLORHAM PARK, N.J., Oct. 25 /PRNewswire/ -- BASF's North American
business said today that its ongoing restructuring programs will
yield an additional $150 million in annual fixed cost reductions by
mid-2007. The company expects one-time costs of $80 million arising
from these measures. The added savings are beyond the originally
targeted $250 million already achieved and will bring the total
fixed cost reductions for the restructuring program announced in
early 2003 to $400 million annually. In addition to the cost
reductions, the company expects to see its earnings before interest
and taxes (EBIT) rise by $200 million on an annualized basis as a
result of the company's Commercial Effectiveness program.
Commercial Effectiveness involves adoption of new pricing
methodologies and business models and focusing technical and
developmental capabilities on customers with whom BASF can grow
profitably. At the same time it will further reduce complexity.
"The upward revision in our targeted cost reduction program is the
result of two factors," said Klaus Peter Loebbe, member of the
Board of Executive Directors of BASF AG and Chairman and CEO of
BASF Corporation, BASF's North American affiliate. "One, we have
expanded the scope of some restructuring projects, and, secondly,
we are further improving the efficiency of our larger manufacturing
sites through intensive benchmarking." The benchmarking program
will identify specific process, productivity, and technology
enhancements that will increase each site's overall effectiveness
while maintaining the highest standards in safety, health, and
environment. Loebbe added, "The revised estimate of fixed cost
reductions reflects the success that we are having with the
restructuring that we announced in 2003. To be a world-class
competitor, we must strive continuously to be an efficient
manufacturer, a partner of choice with our customers, and a leader
of innovation. These two initiatives in cost savings and Commercial
Effectiveness are important milestones in meeting our financial
objectives as well as the goals set out in our BASF 2015 strategy."
In addition, Loebbe said that BASF is still assessing losses from
the Gulf Coast hurricanes; the final loss estimate will depend to a
great degree on the start-up of the Port Arthur, Texas, cracker
that BASF operates in a joint venture with Total. Losses primarily
are due to interruption of business at BASF sites in the region as
well as at suppliers' and customers' facilities, severe impacts on
the transportation infrastructure in Texas and Louisiana, and, to a
lesser extent, property damage. Currently, all facilities with the
exceptions of Beaumont, Texas, and Port Arthur, both in the area
hit hardest by Hurricane Rita, are back to normal operations. The
Port Arthur cracker is in the process of being restarted. The
agrochemicals site in Beaumont will resume full operations November
1. In 2003, BASF announced a two-phase restructuring program with
an initial target of $250 million in annual fixed cost reductions
in North America by 2006. This goal was reached in the second
quarter of 2005, 18 months earlier than scheduled. In the
restructuring, BASF optimized support functions, improved and
consolidated manufacturing site operations, reduced headcount by
30% or more than 4,000 positions, and streamlined business
processes. BASF - The Chemical Company. We don't make a lot of the
products you buy. We make a lot of the products you buy better.(R)
BASF Corporation, headquartered in New Jersey, is the North
American affiliate of BASF AG, Ludwigshafen, Germany. Rated in
FORTUNE magazine as America's Most Admired Chemical Company, the
company employs about 10,000 people in North America and had sales
of approximately $11 billion in 2004. For more information about
BASF's North American operations, or to sign up to receive news
releases by e-mail, visit http://www.basf.com/usa. BASF is the
world's leading chemical company: The Chemical Company. Its
portfolio ranges from chemicals, plastics, performance products,
agricultural products and fine chemicals to crude oil and natural
gas. As a reliable partner to virtually all industries, BASF's
intelligent solutions and high-value products help its customers to
be more successful. BASF develops new technologies and uses them to
open up additional market opportunities. It combines economic
success with environmental protection and social responsibility,
thus contributing to a better future. In 2004, BASF had
approximately 82,000 employees and posted sales of more than $50
billion. BASF shares are traded on the stock exchanges in Frankfurt
(BAS), London (BFA), New York (BF), and Zurich (AN). Further
information on BASF is available on the Internet at
http://www.basf.com/. DATASOURCE: BASF Corporation CONTACT: Robert
Guenther, +1-973-245-6013, or mobile - +1-973-519-2160, Web site:
http://www.basf.com/usa http://www.basf.com/
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