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BASF has reported a bigger than expected slump in sales and profits after world’s biggest chemical maker struggled with high energy prices and a slowdown in global demand last year.

The Ludwigshafen-based group said annual sales were down 21 per cent year on year to €68.9bn in preliminary results on Friday, well below a previously guided range of €73bn to €76bn, as it suffered falling prices for its chemicals amid lower demand.

BASF’s earnings before interest, taxes and special items fell by 44 per cent year on year to €3.8bn, below a previously-guided range of €4bn to €4.4bn.

The company said its cost-cutting measures failed to offset falling prices and high costs for energy and raw materials.

The update is a warning sign for global industry, with chemicals sitting at the foundation of most global supply chains and acting as a bellwether for economic activity.

It comes after the chemicals group slashed its five-year investment budget by €4bn last year as the disappearance of cheap Russian gas made large chunks of its European business unviable. BASF will now invest up to €24.8bn over the five years to 2027, down from €28.8bn.

BASF has also announced a permanent downsizing of its plant in Ludwigshafen in the last year, instead doubling down on a big bet on China, where it is currently building a €10bn state-of-the-art petrochemicals plant.

Anna Wolf, chemical analyst at the Munich-based Ifo Institute, said the European industry’s hope to offset falling demand with a growth in international business had “apparently been dashed”.

Ifo’s benchmark survey of the German chemical industry showed business expectations deteriorated in December, compared to the previous month.

Expectations regarding international business were particularly low, which Wolf said was likely to mean further job cuts. “Expectations [regarding jobs] are at their lowest level since the 2008/2009 financial crisis,” the Institute said.

BASF’s navigation of the challenges facing the industry in Europe, where energy prices have shot up since Russia’s invasion of Ukraine, will be key to the region’s ecosystem of small and medium-sized chemical businesses.

Chief executive Martin Brudermüller, will in April leave the company after five years at the helm. He will be replaced by Markus Kamieth, who has been overseeing the company’s expansion plans in China.

BASF said it would release its final results on February 23.