As part of an effort to close gaps in the value chain, BASF (Ludwigshafen / Germany; www.basf.com) will focus portfolio development in future even more closely on market-driven and innovative businesses, executives of the chemicals and plastics giant stressed at a recent press conference in Ludwigshafen / Germany. This and increased investment in emerging markets will be key elements of the German group’s forward strategy under new CEO Kurt Bock.

In the decade up to 2020, BASF plans to pursue portfolio management within four distinct product groups. In Classic Chemicals, which includes most bulk plastics activities, the goal is to be better positioned in non-European markets and at the same time keep businesses in the integrated production network profitable. This will lead to more targeted investment in emerging markets in Asia – foremostly China, but also in Malaysia – as well as South America, in particular Brazil.

In the Customised Products and Functionalised Materials & Solutions portfolio segments, which include polyurethane systems and engineering plastics, the plan is to move closer to downstream customers and thus become more profitable and resilient to economic cycles. This will mean increasingly coordinating technological expertise, market knowledge and global access to key industries along the value chain, explained Martin Brudermüller, managing board member with responsibility, among other things, for plastics.

After posting a record sales total of EUR 63.9 bn in 2010 (see Plasteurope.com of 25.02.2011), the group expects to increase its overall turnover to around EUR 85 bn in 2015, with the figure rising to EUR 115 bn in 2020. By 2015, sales from new products, processes and solutions launched within the past five years are expected to reach EUR 10 bn and contribute EUR 2.5 bn to EBITDA. By 2020 sales of EUR 30 bn and an earnings contribution of EUR 7 bn are projected from innovations launched within the previous 10 years. Cross-business initiatives, capital investment and acquisitions are envisaged as signposts towards the target.

A cross-divisional customer industry approach is also part of the plan. BASF is already cooperating with German auto manufacturer Daimler to develop the “smart forvision” joint concept car, which incorporates high performance foams with infrared-reflective films, a solar roof with transparent organic solar panels and OLED modules along with an all-plastic wheel made of glass fibre-reinforced polyamide – see Plasteurope.com of 16.09.2011.

The world’s largest chemical producer also perceives “enormous” opportunities in the wind energy sector, where its sales are projected to rise to around EUR 300m annually in 2020. Overall, this “highly attractive” market is foreseen to grow by 10% per year over the current decade. Here, Brudermüller noted, chemical and plastics producers can supply “cheaper, higher-performance and more sustainable material systems” based on – for example – epoxy resins systems, foams and coatings.

In the fast-growing water solutions market, forecast to be worth EUR 20 bn in 2020, BASF extrapolates a sales potential for itself of around EUR 800m by that date. Here it intends to leverage products added to the portfolio through the acquisitions of Ciba in 2009 – see Plasteurope.com of 15.09.2008 – and inge watertechnologies (Greifenberg / Germany; www.inge.ag) as well as its “Ultrason” polyether sulphone (PESU) high-temperature plastic to supply products and technologies to the water membranes sector.

From 2011 to 2015, BASF has budgeted EUR 15 bn for investment in new production facilities, with about 30-40% of this to be spent in emerging markets. Projected figures for 2016-2020 are investments of EUR 15-20 bn, with 35-45% in emerging markets. Planned projects include the expansion of the mammoth plastics and petrochemicals hub at Nanjing / China – for most recent coverage see Plasteurope.com of 12.10.2011 – an MDI plant at Chongqing / China, the polyurethane systems investments in Brazil and China – Plasteurope.com of 25.10.2011 – and an acrylic acid / superabsorbents complex in Brazil – Plasteurope.com of 25.10.2011 as well as construction of a new site in Malaysia with petrochemical giant Petronas.

Towards meeting its innovation and investment targets, BASF intends to pursue acquisitions but management will also consider divestment of cyclical businesses where volatility often pressures earnings. Brudermüller pointed to the spin-off of the group’s styrenics activities into the Styrolution (Frankfurt / Germany; www.styrolution.com) joint venture with Ineos as the most recent example of this strategy. As the group’s engineering plastics and polyurethanes activities are well positioned in growth markets, divestments here are not on the agenda.