BASF Pakistan – Company Profile and Management Report
BASF Pakistan – Company Profile and Management Report
BASF corporation is the North American representative of the BASF group, one of the world’s foremost chemical manufacturers. BASF is a global network with about 115,000 employees serving customers in more than 170 countries around the world. Headquartered in Ludwigshafen, Germany, BASF has production facilities in 39 countries.
From its beginning in 1865 as a manufacturer of dyestuffs from coal tar, BASF has become a producer of the full range of products available for modern chemistry. BASF sales worldwide are approximately $28 billion. They are distributed among six operations-oil and gas, chemicals, products for agriculture, dyestuffs and finishing agents, plastics and fibers, and consumer products.
BASF believes that intensive customer-oriented marketing, integrated production and continued achievements in science and technology are key elements in meeting the company’s objectives.
BASF’s key to success is its effective and efficient accessibility to their customers in any part of the world.To be as close as possible to their customers, a high proportion of capital expenditure has been invested in major integrated production complexes in strategic regions through out the world over the past ten years. These include, in addition to the Freeport, Texas, and Geismar, Louisiana, sites in the United States, complexes at Antwerp, Belgium; Tarragona, Spain; Seal Sands, England; and Guaratingueta, Brazil.
Dedication to supplying high-quality, innovative products has made BASF one of the 10 largest chemical companies in North America. The company believes in listening to, serving and satisfying its customers.
From the beginning BASF has attributed its success to research breakthroughs in modern chemistry. BASF has built one of the most important research organizations in the world– from basic research to applications development and customer technical service. More than 12,000 employees work in the BASF R&D facilities around the world.
In the last decade the company’s expenditure for research and development has increased, clearly demonstrating BASF’s commitment to the future. In 1992 BASF spent nearly $1.25 billion for research. BASF believes that its long term success can only be guaranteed by continuous product and process innovations.
A sense of responsibility towards the environment is also one of the corporate goals. BASF strives to be a reliable, environmentally and safety conscious corporate citizen through out the world.
The company’s strength in research is also directed at providing innovative solutions to the problems of the environment. From year to year the proportion of research costs for environmental protection increases. In the future, BASF is looking forward to make more efficient use of energy and save resources, as well as avoiding the generation of undesired by-products and emissions.
BASF was founded in 1861. Originally its name was Badische Anilin & Soda Fabrik, and it did its early work on coal tar dyes. It was the first company, in 1870, to discover a way to make the red dye alizarin. It was also the first in, in 1897, to make a laboratory version of indigo, “the king of dyestuffs.” The acronym BASF became its official corporate name in 1973. BASF is a chemical company’s chemical company. It makes basic chemicals, the raw materials needed to make plastics and other finished products. Much of its work therefore ends up in the products of other companies. Its paints, for example, glisten on BMWs, Mercedes-Benzes, and Volkswagens (BASF is the largest supplier of paints to those German auto companies). It’s also a powerhouse in dyestuffs, plastics, vitamins, and fertilizers. American audiophiles and videophiles know the company for its tapes. BASF is the company that first made magnetic tape, in 1934, and it is one of the world’s largest producers of the videotape. In the European market it’s a major market of videocassette recorders and floppy discs for computers.
WORLD WAR I
Political controversy has long dogged BASF. Early in this century, in an effort to escape dependence on Chilean nitrate as a fertilizer and gunpowder component (saltpeter), BASF backed the research efforts of a young German-Jewish scientist , Fritz Haber, who succeeded in 1909 in combining the nitrogen of the atmosphere with the hydrogen of water to form ammonia. During the World War I Haber turned his talents to the development of poison gases, which the German army used against the Allied forces. Haber was later named as war criminal, but not before he won the Nobel prize in 1919 for his synthesis of ammonia, an award that was protested by French and British scientists. Haber converted to Christianity, but it was conversion that did not impress the Nazis. He fled to Switzerland where he died alone in 1934.
THE I.G. FARBEN CARTEL
Carl Bosch, a brilliant metallurgical engineer, was named chief executive of BASF after World War I. He was the architect and the first chairman of the I. G. Farben cartel. In 1931 Bosch became the first engineer to receive the Nobel prize for the feat, twenty years earlier, of designing a high pressure chemical process that made possible the mass production of Haber’s invention, synthetic ammonia, which in turn led to nitrogen based fertilizers. During World War I Bosch became a hero in Germany for converting ammonia to synthetic nitrate, thereby assuring the Wehrmacht of a dependable supply of gunpowder and explosives.
In assuming the chief executive’s post at I. G. Farben in 1925, Bosch headed the largest company in Europe and the largest chemical producer in the world. He was a scientist who was intent on conquering the world by breakthroughs in the research laboratories. One of the first moves was to form a partnership with the world’s largest oil company, John D. Rockfeller’s Standard Oil of New Jersey (Exxon today), whose leaders were bowled over by the technical sophistication of Farben’s research. Bosch trooped them through the laboratories of Ludwigshafen, a Rhine River port opposite to Mannheim, and showed them how Farben was working on hydrogenation process that would extract oil from coal. Who needed oil wells?
BASF ENTERS AMERICAN MARKET
The terrified Americans were quick to sign a sort of non aggression pact with Bosch under which Farben agreed to stay out of the oil business, while Standard Oil promised to stay out of the chemical business. They set up a joint company in the United States, owned 80 percent by Standard Oil, 20 percent by Farben and standard transferred to Farben 2 percent of its entire common stock. The Farben-Standard agreement was then expanded to include an exchange of research information on synthetic rubber, which both companies were working on. It was later alleged that the Germans held back on reporting their progress, thus hurting the American effort to develop synthetic rubber.
The cooperation between Farben and Standard Oil continued after World War II broke out in Europe in 1939, and in 1942 it resulted in an antitrust suit brought by the Justice Department. Senate hearings presided over by Senator Harry S. Truman of Missouri depicted Standard Oil in such an unfavorable light that its top two executives, Walter Teagle and William Farish, left the company shortly afterward in disgrace. Coming out of a hearing, Truman was asked by a reporter whether he saw Standard’s pact with Farben as treasonable. He replied, “Why, yes, what else is it?” Thurman Arnold, the antitrust chief in the Justice Department, put in this way: “What these people were trying to do was to look at the war as a transitory phenomenon and at business as kind of permanent thing. Carl Bosch, however, was one of the German industrial leaders to stand up to the Nazis during the 1930s. He met with Adolf Hitler in 1933, seeking support for a synthetic rubber plant, which he got, and warned the Fuhrer that if the Jewish scientists were forced to leave the country, physics and chemistry would be sent back one hundred years in Germany. According to a biographer of Bosch, Hitler roared, “Then we will work one hundred years without physics and chemistry.” The Nazis did not have to do without physics and chemistry even after they purged the Jews–the I. G. Farben companies were harnessed to the state, providing everything the Nazis needed in their rampage through Europe.
Bosch stepped down in 1935, turning over the reins at I. G. Farben to Hermann Schmitz, who had joined BASF after World War I as head of finance. Bosch died in 1940. Schmitz was in the dock in Nuremberg and after being found guilty of plunder and spoliation was sentenced to a three-year jail term.
POST WORLD WAR II EXPANSION
BASF regrouped at Ludwigshafen after the World War II, rebuilding and expanding a chemical complex that was devastated by Allied bombers. It pushed forward into plastics and joined shell in a polyethylene venture before building its own petrochemical works at Antwerp. Then, in 1969, it began its backward integration by acquiring Wintershall, an oil company. The Ludwigshafen compound, where the company is headquartered, covered sixteen hundred acres and holds fifteen hundred factory buildings and laboratories which line fifty-six miles of street. Above and under these streets are 1,150 miles of pipes through which these gases and liquids on their way to the refineries. More than fifty thousand people work in this complex.
While Ludwigshafen remains the most important production center, BASF’s expansion, begun in the late 1950s, has made it a global player in the worldwide chemical industry, a contender in the league whose teams include Du Pont, Dow, ICI, Akzo, Union Carbide, Montedison, Bayer, and Hoechst. Only giants suit up here. BASF tries, more than most companies in the chemical industry, to be as self-sufficient as possible. Its approach was characterized by The Economist as follows: “It wants to develop and find its own sources of oil and gas, which will supply its own refineries, which will churn out the naptha to feed its own crackers, which will produce ethylene the basic petrochemical building block for the house that BASF hopes to build.”
This explains why BASF is drilling for oil and gas in the United States and why it also operates refineries here to produce the feedstocks for plants making end products. BASF wants to do the whole job. In the worldwide putsch (BASF now does more than half its business outside Germany), the United States has assumed central importance. In a series of deals starting in 1958, BASF has build up a commanding U.S. presence, demonstrating that it was ready to take over operations that others were willing to abandon. Its initial foray was a joint venture with Dow Chemical – Dow Badische at Williamsburg, Virginia – but it later bought out Dow’s interest. No more joint ventyres. In 1985 and 1986 it plunked down something like $2 billion to acquire businesses in United States. In this basket were the Enka man-made fibers facilities that the Dutch company Akzo was happy to unload; the Inmont printing ink and auto finish operations that United Technologies was delighted to sell for $1 billion; the high-tech plastics (composite materials) arm of Celanese; and the Zerex antifreeze business of Du Pont.
As a result BASF marched into 1987 with seventy production facilities in the United States doing an annual sales volume of $3.6 billion, which ranked the company in ten largest chemical producers in North America.
A former BASF chairman, Matthias Seefelder, once explained at a press conference in New York why the company looks to America: “The United States is the largest, most competitive chemical market in the world. It has one currency. It has no language barriers. Its successful free enterprise system permits rapid adjustments to technological changes. Profit is not a dirty word here but an incentive to do better.”
BARRIERS IN PROGRESS
It hasn’t been all frictionless process. BASF was placed on the AFL-CIO boycott list in 1984 because of a labor dispute at its chemical plant on the Mississippi River at Geismar, Louisiana, twenty miles south of Baton Rouge. The dispute erupted into one of the most bitter labor-management confrontations of the 1980s after negotiations for a new contract broke down, and BASF locked out 370 workers from the plant on the grounds that it feared sabotage by the employees. Management had been asking for a new agreement calling for wage and benefit concessions by the workers, who were making an average of $14.50 an hour. The workers represented by the Oil, Chemical and Atomic Workers Union (OCAW), offered to take wage cuts but balked at a change in work rules that would have weakened job security. The lockout set the stage for all-out warfare between the union and BASF.
OCAW accused BASF of polluting the Mississippi River and running an unsafe chemical plant. The Geismar facility produces highly toxic chemicals, and the union citing the use of untrained workers, raised the specter of a “Bhopal in a Bayou”- a reference to the 1984 gas leak at the Union Carbide plant in Bhopal, India, where more than two thousand people were killed. “BASF is gambling with human lives,” declared a union press release, “If they lose everyone loses.” BASF scoffed at this charge. On June 11, 1986, Dr. Leslie J. Story, the plant manager, delivered an impressive stack of documents affirming the safety of the plant to a congressional subcommittee investigating OCAW’s charges.
Meanwhile, BASF moved into china, where it is helping Chinese build two new plants, one for the production of polyurethane foam, the other for floppy discs.
Given here is the important data about some vital statistics of the corporate structure of the company. The management of important corporate decisions is carried out by the Board of Executive Directors. This board is also responsible for development and implementation of decisions about the expansion of the company.
Total Assets DM 40,358million
Total Liabilities DM 25,364 million
Paid in Capital DM 14,944 million
Shares Outstanding 58,450,000
Sales DM 43,122.7 million
Profit DM 467,704,789
Dividend Payable DM 467,601,288
Dividend per Share DM 8
Retained Earnings DM 103,501
Total Employees 112,020
In America 16,034
AN EVALUATION OF COMPANY’S PERFORMANCE
In this section a synopsis of the current market performance of the company will be carried out. I will try to compare the current performance of the company with its past performance. Moreover, an overview of the operations performed by the firm in different regions, in 1993, will be given which shows the profitability and success of the market operations of the firm.
EFFECT OF FLUCTUATING ECONOMIC CONDITIONS:
1993 proved to be a difficult year for BASF. The economic recessions in Germany, and Japan were a major hindrance in the firm’s operations. However, economic growth took place in North America, Latin America and large areas of South and East Asia. This growth, however, only partially offset the impact of recessions.
In this period demand for important products was insufficient for the high production capacities to be utilized. New suppliers from the Far East and Eastern Europe adopted an aggressive pricing policy in their efforts to gain market share. BASF, however, managed to maintain its market position. Prices in the world market drastically dropped. BASF’s pre-tax profit therefore declined. Earnings after taxes and minority interests were higher than in the previous year.
In an attempt to strengthen BASF in this difficult economic environment, a number of plants were started up under an ambitious capital expenditure program totaling some DM 10 billion. Together with acquisitions, divestitures and new joint ventures these plants improved the company’s business structure. This is also the aim of the progressive internalization of the business.
The business stabilized at the end of 1993, if at an unsatisfactory level. In the first half-year, sales fell significantly in comparison with the previous year, although some of this lost ground was made up during the second half. A number of products were affected by surplus capacity worldwide, the devaluation of important European currencies and competition from low-waged countries, which together caused drastic price erosion.
EVALUATION OF PERFORMANCE BY REGIONS:
The decline in BASF Group sales was almost exclusively due to poor business in Europe, and especially in Germany. BASF sales here were about 2% down. Sales increased in Latin America and North America, but also in the Far East. In Japan the decline in sales was more than compensated for by the higher yen exchange rate. The reason for drop in sales in Europe was the recession prevailing in many countries, which was exacerbated by government intervention in the markets, such as agricultural policy reforms, health care policy measures and the environmental protection costs. In North America sales were up on the previous year. Earnings improved appreciably. The sale increased in Latin America as well. In Asia, Australia and Africa BASF shared in the dynamic growth of the region. However, in Japan the economic crisis damaged the business.
A FUTURE PERSPECTIVE OF THE COMPANY
In 1993, the company failed to capitalize on its previous market position. However it also did not lose its market compatibility. Although last year did not prove to be as good as before, however, some positive effects were also noticeable. The growth of the North American economy was an encouraging sign for the company. The growth was reflected by increased sales volume in most of the company’s businesses.
The company, during 1993, took a lot of steps to improve its competitiveness. The company is looking forward to a joint venture with Allied Signal Inc. This proposed joint venture would combine the two companies’ nylon carpet fibres and textile nylon businesses, providing the critical mass necessary for BASF’s core nylon business to be an effective global competitor. The company’s withdrawal from the polyester fiber business should also be completed during the next year.
In the current year the company expects only a slight economic recovery in Germany and in most other countries of Western Europe. In North America and South and East Asia we expect the upward trend to continue, while growth in Japan will be weak. Against the backgrounds, 1994 as yet offers no clearly improved prospects of higher demand for chemical products. The company therefore will continue its policy of structural adjustments. New market requirements and rapid change in general conditions call for a high degree of flexibility and rapid entrepreneurial action.
ANALYSIS OF ‘BASF’ EMPLOYEES
Changes in the scope of consolidation and company’s cost cutting measures led to a further reduction in the number of employees in 1993 by a total of 11,234, or 9 percent, to 112,020. More jobs will go during the current year. 5,858 jobs disappeared as result of efficiency improvements, and another, 1,021 due to divestitures. The change in the scope of consolidation reduced the workforce covered by the reporting by a further 4,355. 70,241 people, or 63 percent of the workforce, were employed in Germany. The number of employees in other European countries was down by 1,014 to 15,372.
Taking the changes in the scope of consolidation into account, the personnel costs decreased by DM 401 million to DM 10,770 million. Wages an d salaries accounted for DM 8,436 million, and social security contributions , pension and assistance for DM 2,355 million.
The number of trainees in Germany dropped further to 3,919; however, their proportion of the total work force, 5.6 percent, remained at the previous year’s level.
BASF continues to attach great importance to vocational training and career advancement. Courses in Germany were attended by 48 percent of the workforce.
DIVISIONS AT BASF
Segmentation of divisions at BASF is done by functioning of different divisions. BASF has divided and subdivided its divisions according to the degree of difference among the variety of functions it performs. The major divisions at BASF are following.
COATINGS & COLORANTS DIVISION
BASF is among the leaders in automotive coatings in North America with the widest portfolio of coating products in the industry today. Behind the company’s worldwide reputation for quality and sales to virtually every major automaker lies BASF’s long history in technical innovation. BASF also has led the worldwide introduction of two-component urethane coatings technology. Second-generation technology, introduced in 1992, eliminates acid etching on vehicles. At the same time, the company is preparing to market a one-component urethane-based clearcoat technology that will complement the current two-component technology. It will provide the same performance, but by eliminating the mixing equipment needed to apply the two-component system, will be considerably easier and more economical for the automotive manufacturers to use. In addition, research continues on advanced water-borne and powder coating systems to reduce volatile organic compounds further.
BASF’s to automotive manufacturers as a supplier of OEM coatings helps assure precise color matches for “invisible” repairs. Customers for industrial coatings, too, are faced with meeting stricter solvent emissions regulations. The challenge for the company is to produce new systems economically. Development programs are underway in three different type of technologies: water-borne, electrodeposition and powder coatings.
BASF is a major supplier of colorants to the North American paper, leather, plastics, printing ink, office supply and coatings markets, with productions at a modern dyestuffs synthesis plant at Rensselaer, New York. Sicotan pigments, used primarily in plastics and coatings, add a new line of products at this site.
BASF is a vertically integrated supplier of publication inks in North America with its own azo pigment production. The high quality of products offset and rotogravure inks are marketed to the large publication printers of magazines, catalogs, coupons, advertising circles and books.
New technology based on aliphatic solvents has been introduced to help gravure printers meet regulatory restrictions on aromatic solvent-based systems. BASF is also involved in joint projects with key publication printers to further the development of water based technology. The printing plate unit supplies photopolymer plates and processing systems to the graphics art industry.
BASF container coatings are used in the packaging of such consumer products are food and beverages, grooming aids and paints. The high technology exterior coatings enhance appearance, proceesibility and duration of the can, while interior coatings extend shelf life, guard the flavor and protect its contents. Can producers in North America benefit from the synergies BASF brings to the global technical and marketing organization in meeting high environmental standards, obtaining U.S. Food and Drug Administration approvals and achieving high line speed application capabilities in manufacturing.
Evaluation of Operations in 1993
The products for the textile and leather industries failed to match the previous year’s sales and earnings. Business varied from region to region. In North America it stabilized at a gratifying level. In South and East Asia the markets proved to be stable. In Europe, despite the difficult environment, market shares held up well in strategically important lines. Falling demand in Europe and a gratifying upturn in important overseas markets characterized business in coloring agents and process chemicals. Despite competitive pressure and price erosion BASF defended its position and held its market share.
Sales of colorants for the printing ink industry lost ground, mainly for the price reasons. Colorants and preparations for the coloring plastics fell only just short of the previous year’s high levels. Newly developed Uvinul light stabilizers were launched successfully.
Marker dyes for the petroleum industry made satisfactory progress. Sales of specialty chemicals at the previous year’s level despite of the general slide in the prices. A new super absorber plant was put into operation which will further enhance the quality control efforts of BASF.
Business in color transfer inhibitors for color detergents made gratifying progress in this fast growing segment. Overall the business held up well, despite the difficult situations and unfavorable environment. The business actually augmented in North America, Japan and increasingly important countries of Asia.
CONSUMER PRODUCTS DIVISION
Five different businesses and a research organization are incorporated in the Consumer Products & Life Science Division. While the range of the business is broad, they have a common denominator, i.e., a single, sharp focus on the consumer The agricultural products, nutrition and cosmetics, and pharmaceuticals business is based on heavily regulated, biologically active products for the food, beverage and the pharmaceuticals industries.
The plant protection products help the farmers in United States and Canada to secure the quality of such major crops as soybeans, canola, cotton, peanuts, corn and a variety of fruits and vegetables. The herbicide Facet, marketed by BASF in more than 30 countries, is expected to become one of the most important rice herbicides in the United States for the next few years.
AS one of the first companies to recognize the need for product and environmental stewardship, BASF’s concern for food safety and protection of the environment is deeply ingrained in the research conducted at the Agricultural Research Center in North Carolina. The research carried out at BASF research centers is directed at improving the high standards for safety that already exist for the applicators, consumers and the environment.
An expanding line of personal care products is targeted primarily at the hair and skin care markets. The NVP/PVP resin plant at Geismar has further broadened the company’s line of specialty products for the cosmetics, as well as the pharmaceuticals industry. The pharmaceutical unit, Knoll Pharmaceutical Company, markets prescription drugs in three major therapeutics areas: cardiovascular, analgesics and oncology.
While Knoll has a number of new products in development, it is also strengthening its product line with licensing and co-promotion agreements. In oncology Knoll has started working with Cytogen Corporation in the joint promotion and marketing of the first monoclonal antibody cancer imaging agents in the United States under the trade name OncoScint. This complements of the Knoll researchers who are further investigating potential oncology drugs.
The research in biomedical technology will take a major step forward with the completion in 1993 of the Biomedical Research Center at Worcester, Massachusetts. One of the world’s largest biomedical research facilities, it represents a move towards the internationalization of research within BASF and is a source of growth opportunities.
BASF may be best known by consumers in the United States and Canada as a leading supplier of magnetic media, including microfloppy diskettes, manufactured through BASF’s partnership with Fuji Photo Film. BASF brand blank audio and video cassettes, and computer diskettes and tapes are widely used, as are computer software and pre-recorded audio and video cassette featuring top-selling albums and films on BASF products.
Evaluation of Operations in 1993
New health care regulations, which tend to favor generics, dramatically changed markets for companies carrying out research. BASF pharmaceuticals will adjust to new conditions by concentrating its research funds on selected projects and expanding its business in the generics segment. Costs are being cut further to improve earning power.
In Germany, the Health Care Reform Act left some deep scars: sales of specialty drugs and active substances fell by about ten percent. In other European countries the adverse effects of these health policies were felt. New products which were introduced in Germany, Italy and other countries failed to achieve the sales level originally expected because of changes in physicians’ prescribing habits.
The decline in the sales of the coatings and paints was almost offset by the favorable trend in North America. There was no let-up in the pressure on earnings. Volume of automotive finishes were hit by the sharp decline in European automobile production.
BASF’s program of site rationalization, restructuring and efficiency improvements substantially reduced costs. Although audio/video results thus improved but they are not yet in the black. In computer technology, however, the division succeeded in breaking even, thanks to the reorganization of production and further restructuring.
FIBER PRODUCTS DIVISION
The newly constructed Fiber Products Division has been structured to enable BASF to concentrate on nylon as a core business. It combines the former Fibers Division with the fiber intermediates unit, which will enhance the advantages of vertical integration. Also incorporated in the division are the textile chemicals and colorants, conductive and biocomponent fibers, and non-woven fabrics.
The biggest segment of the businesses supplying nylon fibers and yarns for residential and commercial carpets in North America. BASF is the number one supplier of pre-colored nylon to the carpet industry. It has unparalleled color consistency and colorfastness, outstanding wear performance and superior styling flexibility.
Continuing its long-standing tradition of innovative leadership in the carpet industry, BASF is the first major nylon fiber producer to introduce a 10-year stain removal guarantee to the commercial carpet market. In the residential carpet markets, the company has taken a leadership stance by focusing its merchandise directly on the immediate customers, the carpet mills.
BASF is firmly established as a leading supplier of textile nylon for intimate apparel. The newest development, Silky Touch microfiber nylon, offers the most silk like softness combined with the easy care characteristics of nylon.
BASF is the second largest producer of nylon yarns for sheer hosiery and the world’s largest supplier of torque yarns used in ultrasheer and patterned styles. A significant portion of hosiery yarn production has been transferred to the Anderson site, where a complete range of yarns for use on today’s high-speed knitting equipment is made. This includes the production of partially oriented yarn, which substantially broadens the company’s distribution to the hosiery market. Textured and torque yarn production continues at Lowland, Tennessee.
In the world of commercial design, the shifting emphasis to high performance and value pricing has created acceptance for BASF’s Zefron 200 solution-dyed nylon fiber for upholstery. Highly colorfast and fade resistant and easy to maintain, fabrics of this product are suited to such demanding and high-growth applications as the healthcare and the institutional markets.
BASF supplies a full range of textile dyes, pigments and auxiliaries that are used in apparel, home furnishing and automotive interiors. To become more marketing oriented BASF’s textile colors unit and chemicals unit has become part of the textile products unit.
Another industrial product is anti-static filament yarn, which eliminates static in the carpet. Production of a new-generation antistatic yarn has is scheduled to start up in the first half of 1993 at the Enka site to meet growing demand. BASF is a world leader in manufacturing and product technology for caprolactam and polycaprolactam, the raw materials for nylon. Caprolactam capacity was recently increased to 500 million pounds per year. This expansion assures worldwide customers of BASF a continuous and reliable BASF.
MAJOR AREA OF CONCENTRATION: THE CHEMICALS DIVISION
A general overview of the Chemicals Division
The three core business in the Chemical Division–chemical intermediates, industrial organics, and dispersions–supply a broad range of markets, including food and pharmaceuticals, textiles and home furnishing, plastics, paper and dozens of other industries. The core portfolio of company’s chemical intermediates is based on acetylene-formaldehyde chemistry. BASF is the world’s largest manufacturer of 1,4-butanediol and of the broadest range of derivatives.
BASF also offers the world’s largest range of amines, used in the production of resins, rubber chemicals, pharmaceuticals and agricultural products. In North America BASF is a major supplier of value-added specialty amines. With plenty of growth potential in North America, the chemical intermediates business focuses on extending the range of products. Most of the BASF’s chemical intermediates are produced in integrated, world-class manufacturing facilities at Geismar and Freeport. The downstream derivatives are marketed by BASF’s Consumer Product and Life Science Division.
BASF has been diversifying and adding production facilities for a number of other intermediates as well. In 1989, a facility for manufacturing glyoxal came on stream. This new unit represents an important step in creating an integrated network for production of BASF’s urethane chemicals in North America.
BASF is the world’s largest producer and marketer of acrylic monomers, and one of the largest manufacturers of alcohol. These products are fully integrated into BASF’s global supply network that supports merchant and captive demand in virtually every corner of the world. BASF is among the most versatile suppliers of polymer dispersions with production in 22 countries and sales in most markets of the world. In North America BASF are a major producer of styrene butadiene dispersions with plants in various countries.
The completion and start-up of Acronal acrylic copolymer dispersions plant at Monaca in early 1993 has strengthened BASF’s position and extends their reach into the dispersion markets of North America. More than $70 million have been invested in Monaca site, including state-of-the-art environmental technology that should set the emission standards for dispersion products into the 21st century.
To become more customer oriented and to prepare for the marketing of products, the dispersion business has been organized according to its five major markets. The acrylic dispersions are marketed to the nonwoven, adhesive and construction areas.
After giving an overview of the chemicals division at BASF, now I will further explain the various functions and aspects of the chemical division.
Most people are familiar with chemical feedstocks and most of their products. What lies in between is generally not well known. The list of chemical products at various stages makes impressive readings. The multi-faceted catalog of thousands of chemicals reflects the diversity of production within the BASF group.
The list of intermediates covers more than 700 chemical products. It is a virtual Pandora’s box of chemicals building blocks, including all kinds of substances: alcohols, aldehydes, ketones, quinones, nitriles, amines, amides, and more.
Their formulas are as different as their names, but these compounds all have one thing in common: They are building blocks. Chemists revel in making something new out of them or converting something familiar into something new. The layman may merrily sense their fascination, but never the less appreciate the significant extent of possibilities in the plethora for applications for intermediates.
For instance, see the possibilities inherent in more than 150 amines, a BASF specialty: They can serve as a crop protection products and thus help farmers. In other forms they provide protection against ultraviolet rays and extend the durability of the automobile tires. Cleaning agents and polishing agents can be made from amines, and all additives that make engines last longer.
Integrated chemical production
As part of the closely integrated system many of the more than 300 chemical plants within the Ludwigshafen site manufacture substances that are used for further processing and ultimately , made into end products. Since the other large BASF production complexes in Antwerp, Seal Sands, Tarragona as well as in Geismar and Freeport are similarly integrated, they, too, provide substantial operating efficiencies.
Industrial chemicals as problem solvers
Dimethyl formamide is processed under pressure. It is also used a solvent in making man-made fibres. In the manufacture of DMF air is forced through thick pipes to oxidation reactors for the production of phthalic anhydride, which is used in several ways, including the manufacture of Platinol, a product for processing plastics. Added as plasticizer for PVC, which is hard and brittle in raw state, Palatinol makes PVC products flexible and to a considerable extent elastic.
These examples typify hoe the chemical industry works: Compounds are cracked up or built up component by component. Variations are made in established materials; new building blocks are synthesized. By this means the potential of the raw materials is exploited and basic chemicals are enhanced. Each approach has but one goal: To create efficient active agents for established and new applications, for new materials with new properties.
Industrial chemicals perform all sort of jobs. They make sure that veneers adhere, garden hoses stay paliable, car engines keep running and radiator water is kept from freezing. Such products fulfill their expectations because they have been developed in cooperation with users.
It is only possible to rate the performance of such a product line, to prepare formulations and to develop new processing technologies through the exchange of information with users. BASF’s application technology specialists deal with basic development work and questions from the field. They also stay in close contact to research institutes, regulators in markets through out the world and equipment manufacturers.
The agricultural chemicals
At BASF agricultural chemicals are rooted in a tradition of looking forward. The company markets a comprehensive selection of fertilizers and crop protection products for all major types of applications. The use of chemical products in farming has become a topic of environmental discussions; many, however, fail to take continuing world populations growth into account. To keep mankind fed, more food will have to be available – a goal that can only be achieved on the basis of adequate and proper fertilizer and crop protection product applications.
The “green laboratory”
A new, increasingly important aspect concerns the quality of foodstuffs. The proper application of crop protection products helps to keep food free of harmful microorganisms and thus provide quality assurance. Basically, the green laboratory is a BASF’s step to protect the consumer from any harmful effects that may effect human systems.
It all began with a staff of four gardeners and developed into a research center with more than 1,000 employees and performing work in laboratories and fields as well as stations abroad, maintaining contacts around the world. They are principally engaged in the search and development of new crop protection agents.
Each year the green laboratory examines upto 15,000 chemical compounds which are synthesized or produced by fermentation in laboratories using modern biochemical and biophysical methods. Statistically, only one active agent survives the selection process and qualifies for the application against weeds, plant diseases, or pests. Each product that is ultimately registered has spent eight to ten years in testing prior to reaching marketplace.
Now I would like to give a General overview of the operations performed by BASF chemicals division in recently concluded year.
Evaluation of Operations in 1993
In 1993 the decline in basic selling prices continued, but there was only a slight easing of the raw material prices. Despite strict cost discipline earnings were unsatisfactory. However a new addition to the BASFs line of products is a catalyst which removes both nitrogen oxides and dioxins from the fuel gases. This catalyst will meet the upcoming lower thresholds from emissions from communal waste incinerators.
Completion of industrial chemicals sector intensified further, and despite strict cost management and lower prices for raw materials, BASF did not fully make up the reduction in selling prices. In the markets for adhesive and impregnating resins, pressure on the supply side again increased. Business in European countries outside Germany suffered primarily from the slack demand in the furniture and construction industries.
Sales of intermediates held up, although heavy price pressures, especially on standard amines and diols, led to a decline in the earnings. However sales of specialty amines increased despite of the unfavorable environment.
The chemicals division is planning to install a new plant for the production of UV absorbers based on cinnamate, the world’s most important material for sunscreen product. Also, healthy progress was made by the specialists for the cosmetics industry.
RESEARCH AND DEVELOPMENT
BASF takes the changes taking place in needs, markets and technologies both as a challenge and an opportunity. Innovations today take equal account of higher economic expectations and ecological requirements. For BASF this means the efficient use of its starting materials, cost-effective production, high standards and product safety, optimum performance properties and environmental compatibility.
The protection of surfaces against corrosion and wear has always been a challenging research objective. In recent years BASF acquired an even better understanding of the molecules processes at the interfaces, and have been able to develop new solutions to the problems.
In coating of the surfaces , water-borne and powder coatings are today making an important contribution to keeping the air clean. Clear finishes for the automobiles have to meet very high technological standards. BASF’s research is ensuring these standards by incurring minimum costs.
Finally, BASF believes that launching innovations quickly on the market is a skill becoming more and more critical in determining success in global competition. BASF therefore is using the knowledge and experience of its scientists to provide customers with new solutions to problems based on scientific progress.
The ecological factor is becoming more important day by day, something which is often not noticed by the public. Firstly, BASF is developing new products that are not environmentally harmful. This gives BASF an advantage over its many competitors. Secondly, BASF has designed its products so that recycling is possible. An example of this type of recycling is the practical plastic recycling concepts adopted by BASF. In close cooperation with its customers BASF is investigating the ways to melt down plastics for reuse. With BASF acquiring new recycling technology, waste plastics, even in mixed and contaminated form can be subjected to raw material recycling.
- Firstly, the extremely huge size of the BASF corporation spread all over the world gives it a differential advantage over a lot of other companies. One of the advantages of this huge size is that the company enjoys the economies of scale, i.e. it produces its product at a lower cost.
- Secondly, the economies of scale help in keeping the competitors out of the market, hence reducing the competition.
- Thirdly, the research and development facilities help BASF introducing new products. These new products when introduced in the market gain a greater portion of the market as they are more compatible with it.
- The extremely large size also acts as a weakness for the organization. Due to the large size the organization can not be centralized. Moreover the top management cannot efficiently monitor and manage the operations of all the divisions.
- The role that BASF played in the World War II has created a sort of negative image in the consumers of the American region. This may hamper the BASF’s growth speed in the region.
- Once again, BASF huge size provide it with the opportunities to expand, grow and develop. The size of the corporation acts as the building ground for the future development of the organization.
- BASF has availed a recent opportunity to expand by buying out ‘Boots Pharmaceuticals’ and hence expanded its operations.
- Currently, a major threat faced by BASF is the aggressive pricing policy adopted by the suppliers of Far East and Eastern Europe in their efforts to gain the market share.
- A period of recession is hampering the growth and cutting down the sales volume. This recession in Western Europe is now a serious issue for the top management of the organization.