Evonik Raises Outlook Significantly After 2Q 2024 Results

Evonik significantly increased its earnings in the second quarter of 2024 despite a persistently difficult economic environment. The final figures confirm the preliminary data announced on July 15: adjusted EBITDA rose by 28% to €578 million compared to the previous year. Free cash flow was clearly positive at €217 million, following a cash outflow of €203 million a year earlier.

“We are cutting our costs and doing our homework – and it shows,” says CEO Christian Kullmann with regard to the ongoing restructuring programs. “We have to rely primarily on ourselves at the moment, as there is no real tailwind from the economy.”

Group sales in the second quarter rose by 1% to €3.93 billion compared to the same period last year. Prices fell by 2%, partly due to the passing on of lower raw material costs. By contrast, prices in the Animal Nutrition business continued to recover. Evonik was able to increase sales volumes by 5%.

The positive volume development in Specialty Additives stood out, boasting double-digit growth rates. In addition to continued strict cost discipline, lower production costs also contributed to the improvements. The adjusted EBITDA margin rose by 3.1%age points to 14.7%.

“We are headed in the right direction, and the improvements in our key financial figures compared to the previous year are really encouraging,” says CFO Maike Schuh. “However, the current recovery compares to a very weak 2023, and we are still a long way from reaching our goals.”

On July 15, 2024, Evonik raised its outlook for adjusted EBITDA in 2024. The company now expects the measure in a range between €1.9 billion and €2.2 billion (previous range: €1.7 billion to €2.0 billion). The outlook for the other key financial figures remains unchanged: Sales should reach between €15 billion and €17 billion. Evonik anticipates a cash conversion rate of around 40% and a significantly higher ROCE. For the third quarter, Evonik expects adjusted EBITDA to be on par with the second quarter.

The Evonik Tailor Made efficiency program will contribute initial savings from the end of this year. Negotiations on the framework for socially responsible job cuts in Germany have been concluded. Evonik recognized provisions of €238 million in the second quarter to implement these reductions.

Excluding the provisions, general administrative expenses in the first half of the year were already down 5% compared to the previous year. The provisions are also largely responsible for the negative net income of € -5 million for the second quarter. In the same quarter of last year, the net loss amounted to € -270 million.

The sale of the superabsorbents business is expected to be completed in the current third quarter. Two of the three business lines that used to form the Performance Materials division will then have a new owner.

Sales in Specialty Additives rose by 4% to €944 million in the second quarter of 2024, driven by noticeably higher volumes. Sales prices declined, primarily because of passing on lower raw material costs and slightly negative currency effects. Products for the paints and coatings industry recorded noticeably higher volume demand, particularly from Europe and Asia, and achieved higher sales than in the previous year.

Additives for polyurethane foams and consumer durables achieved slightly higher sales despite falling prices due to rising volumes. Additives for the automotive sector generated noticeably higher sales than in the previous year on increased volumes worldwide. Crosslinkers also recorded noticeably higher demand, although sales remained below the previous year’s figure due to falling prices.

Adjusted EBITDA increased by 11% to €220 million thanks to the increase in volumes, the resulting higher plant utilization, and lower raw material costs. The adjusted EBITDA margin improved from 22.0% in the same quarter of the previous year to 23.3%.