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BASF opts out of care chemicals price war

By Guy Montague-Jones , 04-Jun-2009

The head of BASF’s care chemicals business said the company refuses to be drawn into a price war to compete in the depressed market for personal care ingredients.

In an interview with Bloomberg at BASF headquarters, the head of the care chemicals unit, Gabriel Tanbourgi, said the company would rather reduce production of its personal care and household ingredients than enter a price war.

Price fluctuations

Tanbourgi told Bloomberg: “Everyone is trying to use the crisis to talk prices down. We will not decrease prices to a level that is no longer economical.”

High oil prices had pushed prices up to record levels last summer, but since the financial crisis hit in the autumn, selling prices have declined.

However, BASF has refused to follow suit and has instead increased the prices of its care chemical products.

In its first quarter financial results, published last month, the company said these price increases had failed to offset significantly lower sales volumes, but that the care chemicals unit was not as badly affected by the economy as other divisions.

Tanbourgi said customers still need shampoo, diapers and detergent.

Falling demand

Nevertheless, BASF is facing financial headaches. Overall first quarter sales revenue dropped 23 per cent to €12.2bn, dragged down by declines of 45 per cent in chemicals and 30 per cent in plastics.

The dramatic falls are caused by fearful manufacturers countering lower consumer demand by depleting stocks of raw materials. Tanbourgi said visibility is low because clients are now ordering for the short term to avoid building up excessive inventory.

To protect profits, BASF is cutting 2,000 jobs, and even in the recession resistant care chemicals division, the company is pursuing a number of avenues to reduce costs.

At the same time, Tanbourgi told Bloomberg that acquisitions are a possibility. The business leader said acquisitions could plug gaps geographically and add new products.