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Evonik’s earnings, sales beat consensus, expects growth in specialties during 2020

March 5, 2020
Energy & Chemical Value Chain

Evonik Industries reports a 38% rise year on year (YOY) in adjusted net income to €231 million ($257 million) for the fourth quarter on a continuing operations basis, on a slight growth in sales of 1% YOY to €3.28 billion.

Adjusted EBITDA increased 26% compared to the prior-year period to €505 million, with the company saying it achieved higher YOY earnings in all chemical segments and “strict cost awareness on all levels.”

Volumes were stable at a group level, while prices were down 4% compared to the prior-year period, it says. The adjusted net income figure substantially beat the analysts’ consensus estimate of €171 million, and also beat the sales consensus estimate of €3.22 billion, according to Vara Research. Adjusted EBITDA beat consensus by €6 million.

In its outlook for 2020, Evonik says it is expecting growth in its specialty businesses, but that “a less dynamic global economy is expected to burden the more commoditized businesses.” Sales are expected to remain stable and it is forecasting an adjusted full-year EBITDA of between €2.0 billion and €2.3 billion for 2020. Adjusted EBITDA in 2019 was €2.15 billion, flat with the previous year, while sales declined 1% YOY to €13.10 billion. Net income for 2019 more than doubled to €2.1 billion, driven primarily by proceeds from the sale of the methacrylates business in July.

The company adds that a “low-growth environment” is expected to continue in 2020, with “no macro recovery assumed.” It has also included an estimated financial impact from the coronavirus disease 2019 (COVID-19) outbreak of €30 million for the first quarter of 2020.

In the fourth quarter of 2019, Evonik’s resource efficiency segment achieved a 23% rise YOY in adjusted EBITDA to €314 million, despite a 1% decline in sales to €1.39 billion. The ongoing challenging market environment in the automotive and coatings businesses continued, with sales volumes falling 4% on slower demand, it says. This was countered by stronger EBITDA margins because of continued solid pricing and cost savings, resilient performance in oil additives, high-performance polymers and crosslinkers, and license income from two projects in its active oxygens business.

The company’s nutrition and care business reported growth of 2% YOY in adjusted EBITDA to €170 million, on sales that fell 1% to €1.16 billion. Evonik says volumes saw “slightly positive” growth of 1%, with higher volumes in animal nutrition mitigated by the company’s planned shift from bulk to specialty products in care solutions. Prices were down 5% YOY.

In Evonik’s performance materials business, adjusted EBITDA increased 9% to €50 million compared to the prior-year quarter, on sales that dropped 2% to €495 million. Volumes were positive overall with an increase of 9%, countered by prices that were 14% lower YOY mainly because of lower butadiene and isononanol (INA) spreads, it says. The quarter also included a €10-million negative impact from compressor failure in its C4 businesses, it adds. Evonik notes “weaker market demand and spreads for petrochemical derivatives,” during the fourth quarter, including for butadiene, INA, and butene-1.

Evonik notes that on 1 July this year it will adjust its corporate structure, with the current operating segments to be transferred into four new divisions “that are more balanced in their size and type of business.” The four divisions will be: Specialty Additives, Nutrition & Care, Smart Materials, and Performance Materials. Financial reporting in the new structure will start from the third quarter of 2020 onward, it says. Further details will be outlined in April, it adds.

By Mark Thomas

Source: Chemical Week

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