BASF shares rise after strategy update and potential early share buyback

Investing.com -- BASF SE (ETR:BASFN) shares rose over 2% on Thursday after the company said it will retain its Environmental Catalyst and Metal Solutions business and may accelerate a €4 billion share buyback program, while confirming its 2028 financial targets during a Capital Market Update in Antwerp.

Morgan Stanley said, “De-gearing commencing as stronger FCF inflection emerges,” highlighting BASF’s focus on reducing debt while freeing up cash for shareholder returns. 

The brokerage added that, “the group focus on value realization and de-gearing remains elevated.”

BASF targets EBITDA before special items of €10 billion to €12 billion in 2028, cumulative free cash flow above €12 billion from 2025 to 2028, and a return on capital employed of around 10% in 2028. 

The company reaffirmed an annual dividend of at least €2.25 per share from 2025 to 2028, totaling approximately €8 billion. 

Share repurchases are planned for at least €4 billion between 2027 and 2028, with the potential to start earlier depending on proceeds from portfolio measures, including the Coatings transaction.

The company will retain the Environmental Catalyst and Metal Solutions (ECMS) business, which generated €7 billion in sales in 2024 and was carved out in 2023. 

The business is expected to generate cumulative cash flows of around €4 billion from 2024 to 2030. 

In the Battery Materials division, which had sales of €0.6 billion in 2024, BASF has reduced fixed costs and capital expenditures and signed agreements with customers, including CATL, to fill existing capacities. The division is also exploring collaboration opportunities along the value chain.

In the Coatings division, BASF completed the sale of its Brazilian decorative paints business to Sherwin-Williams for $1.15 billion on a cash and debt-free basis, effective October 1, 2025. 

Strategic options are being evaluated for the automotive OEM coatings, automotive refinish coatings, and surface treatment businesses, which generated €3.8 billion in 2024, with a decision expected in the fourth quarter of 2025.

BASF’s Agricultural Solutions division, which generated €9.8 billion in sales in 2024, is targeting IPO readiness in 2027 for a minority share listing. Legal entity separation and implementation of an industry-specific ERP system are underway.

The company is reducing expected payments for property, plant, and equipment and intangible assets between 2025 and 2028 from €17 billion to €16 billion. 

The new Zhanjiang Verbund site in southern China is on schedule and below budget, with total capital expenditures between 2019 and 2028 reduced by €1.3 billion to roughly €8.7 billion. 

The site is expected to deliver €1-1.2 billion of EBITDA by 2030, though contributions in the next one to two years will be limited.

BASF flagged the role of its core businesses, Chemicals, Materials, Industrial Solutions, and Nutrition & Care, which generated €40.3 billion in sales in 2024. 

Measures including the closure of unprofitable plants, start-up of new operations, and strategic evaluations are expected to lift earnings in core businesses by around €400 million by 2028.