Evonik publishes preliminary financial data for the second quarter of 2023: Economic environment continues to be difficult, only slightly improved compared to the previous quarter

● Adjusted EBITDA in the range of 430 million to 450 million euros in the second quarter, a slight improvement from the first quarter

● Demand continues to be sluggish, and the recovery process is slower than expected

● In view of the fact that there is still no sign of recovery in the second half of the year, the expected target for 2023 is adjusted

Evonik released preliminary financial data for the second quarter of 2023. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be between 430 million and 450 million euros, a slight improvement from the first quarter (409 million euros). Strict cost containment measures supported earnings. However, the level of earnings was lower than expected due to the weak economic recovery. Adjusted EBITDA was down about 40% compared to the same period last year.

"Although we saw signs of business recovery in the first quarter, the level of recovery in May and June was much weaker than we expected. We have taken cost control measures to prevent Earnings are down significantly, but we're still feeling the impact of the slowdown in the global economy."

In the second quarter, demand across all end markets continued to be weak and the impact of customer destocking continued. Sales volumes were at a lower level compared to the previous quarter. Selling prices remained stable, especially in the specialty chemicals business. The weak economy is also reflected in sales, which are expected to be close to 4 billion euros in the second quarter.

As early as the second half of 2022, Evonik is implementing a cost control program to secure earnings. The group plans to achieve a cost reduction target of 250 million euros this year through measures such as not filling vacancies, reducing external services and travel. Relevant results will be further revealed in the second half of this year.

Chief Financial Officer Maike Schuh said: "We still need to do more to secure free cash flow. We will further reduce capital expenditures and net working capital." In view of the continued weak market demand, Evonik has postponed or canceled smaller plans. expansion and investment projects. In 2023, Group capital expenditures are expected to be approximately EUR 850 million. Earlier this year, Evonik had cut its investment budget from 975 million euros to 900 million euros.

"Our sales volume continues to be weak, and this continuous cycle may be unprecedented." Ku Leman said, "We have planned a cost reduction plan earlier, and we are currently strictly implementing the relevant measures. However, we were unable to achieve the earlier plan. set goals."

With continued weak demand and no signs of recovery in the second half of the year, Evonik now expects adjusted EBITDA in the range of 1.6 billion to 1.8 billion euros for the full year 2023. Previously, the group expected adjusted EBITDA to be between 2.1 and 2.4 billion euros, and would be at the lower end of this expected target.

Sales are expected to be between 14 billion and 16 billion euros (previously: 17 billion to 19 billion euros). Evonik still plans to increase its cash conversion rate to around 40 percent this year (2022: 32 percent). However, due to the sluggish operating performance, the absolute growth target of free cash flow set at the beginning of the year will not be achieved.

Evonik will publish its full second-quarter results on August 10, 2023.

business unit performance

Specialty Additives business unit: Adjusted EBITDA increased slightly in the second quarter compared to the first quarter of 2023 and is expected to be around EUR 200 million. Strong destocking by customers, especially in the coatings industry, eased in the second quarter, although end-customer demand remained weak.

Functional Materials: Earnings rose slightly sequentially, mainly due to improved earnings in MTBE and superabsorbents. Adjusted EBITDA for the business unit is expected to be approximately EUR 45 million in the second quarter.

Nutrition & Consumer Chemicals: Earnings were down quarter-on-quarter. Adjusted EBITDA for the second quarter is expected to be approximately EUR 70 million. The demand for methionine business rebounded, but the price dropped slightly again, and it is expected to remain stable in the third quarter. At the beginning of this year, Evonik announced the transformation of the animal nutrition operation model. This initiative will first bring about a positive impact of about 30 million euros this year, and plans to achieve an overall cost reduction of about 200 million euros by 2025.

The Smart Materials business unit: Adjusted EBITDA was around EUR 120 million in the second quarter due to the impact of planned maintenance shutdowns at the production facilities for the high-performance polymer polyamide 12 (PA12). Costs for plant overhauls and production shortfalls due to shutdowns had a negative impact of EUR 40 million compared to the first quarter. Following the successful completion of the maintenance work, the capacity of both the first plant and the brand new second plant can be increased further starting in July.

Technology & Infrastructure/Other Business Units: Earnings improved significantly from the prior quarter. Adjusted EBITDA was approximately EUR 5 million in the second quarter. This business unit has the largest number of employees and is therefore most affected by the implementation of cost containment measures and the withdrawal of bonus reserves.