November 6, 2019
Evonik confirms full-year earnings outlook despite ongoing weakness in global economy
Evonik is sticking to its full-year earnings outlook despite an ongoing weakness in the global economy.
The company expects adjusted EBITDA to remain at least stable compared with last year. Sales are now expected to be slightly lower than the previous year because of lower demand. Evonik had expected sales to remain stable. In 2018, Evonik generated -- excluding the divested Methacrylates business -- sales of €13.3 billion (US$14.7 billion) and adjusted EBITDA of €2.15 billion (US$2.4 billion).
"We prepared ourselves at an early stage with stricter cost discipline and additional contingency measures for a cooling global economy," said Christian Kullmann, chairman of Evonik's executive board. "We are being very proactive to ensure we meet our full-year outlook."
The 2018 initiated efficiency programme to reduce administrative and selling expenses by €200 million (US$221.5 million) annually has been accelerated. By end of this year, Evonik will achieve €120 million (US$134 million) of savings, €20 million (US$22.4 million) more than originally planned. A further €20 million will be saved with additional contingency measures such as delaying new hires and more restrictive expenditure on external services.
Evonik is specifying its full-year outlook for free cash flow and is now expecting a level of around €700 million (US$775.3 million), a significantly higher free cash flow compared with last year. This is mainly due to lower capex spending, less build-up of net working capital and the partial reimbursement of pension payments from the Contractual Trust Arrangement (CTA). The more precise outlook does not include taxes incurred from the carve out of the divested Methacrylates business.
The global economic slowdown continued to impact Evonik's performance in the third quarter. In the months July to September sales fell 3% to €3.23 billion (US$3.6 billion) due to lower volumes and selling prices. Adjusted EBITDA fell 6% year-on-year to €543 million (US$601.4 million).
For the Nutrition & Care segment, Evonik's sales declined 2% to €1.14 billion (US$1.3 billion) in the third quarter.
Demand for essential amino acids for animal nutrition remained high while selling prices declined further.