Executive Summary: While BASF’s January 2026 preliminary results highlight a “beat” on cash flow expectations and the execution of the “Winning Ways” strategy, a longitudinal analysis of the firm’s performance paints a more troubling picture. Our analysis suggests that the current management narrative, focused on portfolio optimization and restructuring, may be masking a decade-long structural decline in core earning power and market scale.
1. Scale Contraction
The official report emphasizes 2025 sales of €59.7 billion as being “in line with expectations.” However, when stripping away the anomalous price spikes of 2020-2022 during COVID/Energy bubble, the adjusted revenue trendline reveals a consistent contraction.
- From a structural base of ~€70 billion in 2015, the firm is on a trajectory toward a €60 billion revenue floor by 2025, but our analysis suggests that this value is masking a loss of €27 billion of market relevance. As BASF divests “not-key” businesses, the remaining core is failing to capture growth, ceding value to more agile global competitors.
2. Profitability and Cash Generation:
Management has lauded a Free Cash Flow (FCF) of €1.3 billion as a sign of health. Viewed in isolation, it is a positive data point; viewed in context, it is a symptom of decay.
- EBITDA Erosion: EBITDA (before special items) has shown a negative slope for ten consecutive years.
- Cash Flow Constraints: The consistent decline in the FCF trendline limits the “dry powder” available for the very innovation required to reverse this trend. The firm is increasingly reliant on asset liquidations (main examples:Construction Chemicals 2020, Global Pigment Business 2021, Coating Business 2025).
3. Restructuring
The news release frames “considerably higher restructuring costs” as a necessary investment in the future. However, our analysis suggests these costs have become a chronic feature of the P&L rather than a one-time fix.
- Management Quality: The divergence between “actual” performance and “adjusted” trendlines points to a failure in long-term strategic positioning.
- The “Value Trap” Risk: By selling off profitable or high-potential business units to manage short-term debt and dividends, management risks leaving behind a “rump” business that lacks the scale to compete in an increasingly commoditized chemical landscape.
The long-term trendlines indicate a business in a managed retreat. Without a fundamental shift in management quality and a halt to the erosion of its industrial core, the “Winning Ways” may lead to a significantly smaller, less influential BASF.