(Bloomberg) -- BASF SE’s earnings slumped last year after surging energy expenses offset cost cuts and weighed on production at Europe’s biggest chemicals company.

Income before interest and tax before special items fell to €3.8 billion ($4.1 billion), from €6.9 billion last year, after sales came in below estimates. Cash flows from operating activities were above the prior year, BASF said Friday, citing preliminary full-year results.

BASF is among German chemical makers struggling with a demand slowdown and elevated energy costs after Russia’s invasion of Ukraine ended their access to cheap natural gas. The manufacturer, which is closing a number of energy-intensive factories, said “unplanned” shutdowns in its chemicals division in the US and China contributed to lower earnings.

The company’s results show “that the start into 2024 will be difficult,” said Stifel analyst Andreas Heine. Still, the strong free cash flow is good news and lifts prospects for a stable dividend, he said.

BASF rose 1% as of 9:50 a.m. in Frankfurt. The shares have declined around 10% this year. 

The manufacturer of agricultural products, coatings and plastics in December outlined plans to carve out two divisions in a bid to bolster profits, alongside broad cost cuts. The company also is swapping out its chief executive officer and reducing investments by €4 billion over the next years to deal with the headwinds.

Read More: BASF Appoints New CEO as Chemicals Maker Seeks Efficiencies

Germany’s chemical producers last month warned of an ongoing deep recession for the industry, with a recovery unlikely to take hold before 2025. Nearly one in 10 respondents surveyed by the country’s VCI lobby said they were permanently closing production processes due to challenging industry prospects in Germany.

(Updates with analyst comment in fourth, shares in fifth paragraph.)

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