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Company update: Evonik

Evonik significantly exceeded forecast for 2009 and reports a good start to 2010. Fiscal 2009: sales dropped 18% due to the economic situation; EBITDA only down slightly year-on-year (-6%).

German specialty chemicals company Evonik mastered the challenges well in 2009. “The Group successfully confronted the global financial crisis and its repercussions. The pleasing start to 2010 strengthens our confidence about the full year,” said Dr. Klaus Engel, Chairman of the Executive Board of Evonik Industries AG.
 
“Following a difficult start to 2009, in the second half of the year we managed to make up for much of the sharp downturn in the operating result, principally through strict cost discipline and by raising efficiency,” explained Dr. Engel.
 
Lower sales due to economic conditions
In 2009 Group sales slipped 18% year-on-year to €13.076 billion. However, EBITDA (earnings before interest, taxes, depreciation, amortization and the non-operating result) only slipped 6% to €2.025 billion year-on-year, compared with decline of 34% in the first six months.
 
This performance was due to effective cost-cutting and a slight upturn in demand from the summer. Overall, the Group’s EBITDA margin climbed to 15.5% in 2009, which was well above the previous year’s level (13.6%).
 
Improved cash flow
Evonik substantially improved the cash flow from operating activities from €388 million in 2008 to €2.092 billion in 2009.
 
A key factor here was the considerable reduction in net working capital, in other words, the short-term capital tied up in operations.
 
The cash flow from operating activities was sufficient to reduce net financial debt by €1.152 billion (just over 25 percent) to €3.431 billion and finance investments.
 
 
Cost savings well above target
Evonik took extensive and rapid action to cut costs and raise efficiency in 2009. The main aim was to improve earnings and liquidity in the short term.
 
Savings exceeded €500 million, which was well above the short-term target of around €300 million. In the second half of the year the Group was therefore able to make up some of the shortfall in business.
 
In addition, Evonik aims to achieve lasting cost savings of around €500 million p.a. from 2012. About a quarter of these have already been achieved and specific measures have been defined for 70% of the total.
 
No dismissals until 2013
Dr. Engel stressed the “tremendous performance” by the entire Evonik team last year. He said that it was thanks to all employees that Evonik could present financial figures that had “seemed unattainable in the first half of the year.”
 
That is the result of a concerted effort by management and employees together with the Works Councils and the Mining, Chemical and Energy labour union (IG BCE).
 
In Germany agreement has now been reached with the Works Councils and the IG BCE labour union that Evonik will refrain from dismissals for operational reasons up to December 31, 2012.
 
Group strategy
Following an extensive analysis, in December 2009 Evonik decided to concentrate on specialty chemicals in the future. The Group already ranks among the global leaders in this field.
 
The aim is to enable the energy business to fully exploit its considerable growth potential in collaboration with one or more partners, while remaining part of the Evonik Group.
 
In addition, Evonik plans to combine its real estate activities with those of THS GmbH, creating a strong residential real estate company with around 130,000 residential units.
 
In the Chemicals Business Area Evonik is systematically focusing on high-margin business with attractive growth and earnings potential.
 
Above all, the Group wants to benefit from global megatrends: resource efficiency, health and nutrition, and the globalization of technologies.
 
Chemicals Business Area
The performance of the Chemicals Business Area varied greatly in 2009. Despite initial signs of an upturn, businesses focused on the automotive, construction and plastics industries were particularly badly affected by the crisis.
 
By contrast, demand for products for the consumer goods, pharmaceuticals and animal feeds sectors was positive.
 
This business area’s sales contracted by 15% to €9.978 billion (2008: €11.762 billion).
 
The Chemicals Business Area reported EBITDA of €1.602 billion in 2009, only 1% less than in 2008.
 
Outlook for 2010
Evonik is looking ahead to 2010 with confidence. The Group made a good start to the year. In January and February sales and all earnings indicators were well above the year-back figures, although volumes and sales were still lower than in 2008.
 
The economic outlook for the present year is still dominated by uncertainty and a number of question marks remain. However, given the renewed upturn in volumes, Evonik expects sales in 2010 to be higher than in 2009.
 
Related website: Evonik
 
 

Dick Ziggers

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