Company update: Evonik Q3

The company’s “On Track” efficiency improvement program is a success, Evonik said.

 

Nine-month sales and EBITDA are down considerably year-on-year due to the economic crisis, but operating cash flow almost quadrupled in the first nine months—substantial reduction in net financial debt.

 

Evonik’s outlook for full year remains cautious despite upturn in business.

 

“Our efforts to lower costs and raise efficiency are having an effect. We are on course despite rough seas,” commented Dr. Klaus Engel, Chairman of the Executive Board of Evonik Industries AG.

 

Evonik’s operating business remained adversely affected by the global economic crisis in the third quarter. However, the Chemicals Business Area reported a perceptible upturn in demand compared with the first half of 2009, although volumes were still below last year’s level.

 

The Evonik Group generated sales of €3,309 million in the third quarter of 2009. That was around 20% less than in the same period of last year (Q3 2008: €4,138 million) but roughly 8% higher than in Q2 2009.

 

Prompt action to raise efficiency and cut costs played a key role in safeguarding earnings. Group EBITDA (earnings before interest, taxes, depreciation and amortization) increased 18 percent to €629 million in Q3 2009 (Q3 2008: €535 million), which was the first year-on-year improvement in operating earnings this year.

 

All three business areas contributed to the 23 percent improvement compared with the second quarter of 2009. The EBITDA margin climbed to 19 percent in Q3 2009 (Q3 2008: 12.9 percent). Net income rose significantly in Q3 2009 to €168 million (€72 million).

 

Engel is satisfied with the progress of the “On Track” efficiency improvement program, which aims to achieve a substantial and sustained improvement in Evonik’s competitiveness.

 

The three main elements of this program are systematic reorganization of administrative structures, active portfolio management and tough cost cutting. Engel commented: “We will exceed our goal of saving €300 million this year alone.”

 

The Group is also moving ahead rapidly with its goal of leveraging sustained savings of around €500 million p.a. by 2012.

 

The upturn in demand registered in some parts of the Chemicals Business Area in the second quarter strengthened in the third quarter and spread to further industries.

 

Evonik reported a recovery in demand, especially in Asia and Europe, but business was more sluggish in North America. Despite the upturn in demand, volume sales fell 7% year-on-year in the third quarter.

 

Selling prices also declined, partly because lower raw material prices were passed through to customers. Overall, the Chemicals Business Area reported a 16% drop in sales year-on-year to €2,591 million in Q3 2009 (Q3 2008: €3,082 million).

 

Thanks to successful cost-cutting, EBITDA improved 16 percent year-on-year to €505 million (Q3 2008: €434 million).

 

Sales declined 35% year-on-year to €562 million in the Energy Business Area (Q3 2008: €870 million) as a result of lower volume sales and coal prices. EBITDA was almost unchanged year-on-year at €100 million (Q3 2008: €102 million).

 

The Real Estate Business Area reported a slight increase in sales to €95 million in the third quarter (Q3 2008: €94 million). EBITDA advanced by €3 million to €49 million (Q3 2008: €46 million).

 

Evonik’s guidance for the coming months remains cautious: The Group expects a slight upturn in some chemicals business lines but does not yet anticipate a sound and broadly-based recovery.

 

Overall, Evonik expects to report a substantial drop in full-year sales in 2009 as a result of the significant reduction in chemicals volumes caused by the economic situation.

 

The decline in EBITDA is expected to be in the low double-digit percentage range, with relief coming from short-term cost-savings, which will exceed the planned level of €300 million.

 

Net income will be well below the prior-year figure, which contained high gains from the divestment of non-core activities.

 

Related website: Evonik Industries