Exceeding market expectations! Evonik releases preliminary financial data for Q3

Evonik Group, the world's leading specialty chemicals company, released its 2020 third-quarter performance report. The adjusted EBITDA (EBITDA) of the group reached 519 million euros, which was significantly higher than market expectations (analyst consensus forecast: 471 million euros).

The adjusted EBITDA in the third quarter showed a trend of continuous improvement, which was only 4% lower than the same period last year. In the second quarter, adjusted EBITDA was still 19% lower than the same period last year. Sales in the third quarter were 2.92 billion euros (the same period last year: 3.23 billion euros).

Evonik Industrial Group Chairman Couleman said: "The performance so far has benefited from the organizational restructuring and related strategic measures implemented in the past few years. In addition, the new financial reporting structure clearly shows the growth of business under the new corporate structure. Level of development."

Starting from the third quarter of 2020, Evonik will release financial reports in accordance with the new business unit structure. Since the first nine months of this year, the three major growth business units of specialty additives, nutrition and consumer chemicals, and smart materials have all demonstrated resilience to the crisis and achieved stable EBITDA and price performance.

In the third quarter of 2020, the Group's overall business performance has improved significantly month-on-month. Thanks to the business performance of the specialty additives and smart materials business unit, this trend became more obvious in September and achieved higher-than-expected performance. In the third quarter, thanks to stable prices, the specialty additives business segment maintained strong resilience and achieved a high profit margin of 27.5%. The inorganic materials (such as hydrogen peroxide and catalyst) business of the smart materials business segment has developed steadily, and the automotive-related industries have also continued to improve.

Raise free cash flow expectations again

Ute Wolf, Chief Financial Officer of Evonik, said: “The COVID-19 crisis has not yet ended and the macro environment is still highly uncertain. Despite this, we are still unswervingly fulfilling our commitments. We released our full-year expectations in May. It was confirmed in the second quarter financial report in August. Taking into account the continuous improvement of the group’s performance in the third quarter and the stable performance of the growing business unit, we can now further clarify the full-year EBITDA forecast and raise the free cash flow forecast again.”

Although the income level in the first 9 months was lower than last year, free cash flow is expected to be at least the same as last year (January-September 2019: 417 million euros), which is mainly due to the structural costs implemented by the company in the past year Savings, and lower bonuses and tax expenditures. In addition, during the remainder of the year, net working capital performance is expected to show a positive trend. To this end, Evonik will increase its full-year free cash flow forecast to around 700 million euros. The cash conversion rate is currently expected to be above 35% (previously expected: at least the level of last year, which is 33.3%).

Evonik had previously expected adjusted EBITDA for the full year to be between 1.7 billion euros and 2.1 billion euros. At present, this expectation has been reconfirmed and further clarified: Evonik currently estimates EBITDA between 1.8 billion euros and 2 billion euros (2019: 2.15 billion euros). Sales are expected to remain unchanged, between 11.5 billion euros and 13 billion euros (2019: 13.1 billion euros).

Evonik will announce the final results of the third quarter on November 3, 2020, and hold a conference call with analysts and investors.

Business performance

Specialty additives business segment: The business continued to show resilience, prices were stable, and a high profit margin of 27.5% was achieved. The business performance in end markets such as construction and renewable energy is strong, and the business in this sector also benefits from the government's stimulus plan. In addition, the automotive, coatings and consumer durables markets gradually recovered, and this trend became more pronounced at the end of the quarter. In the third quarter of 2020, sales of the specialty additives business unit fell by 10% to 777 million euros (third quarter of 2019: 861 million euros), and adjusted EBITDA fell by 8% to 214 million euros (consensus forecast: 197 million euros) Euros; third quarter of 2019: 232 million Euros).

Nutrition and Consumer Chemicals Business Unit: The overall performance is mainly due to the active structural cost management and the continued resilience of the healthcare and nursing business. After experiencing the strong performance in the first half of the year, the sales volume of the animal nutrition business gradually returned to normal levels, and was negatively affected by exchange rate changes. In the third quarter of 2020, sales in the Nutrition and Consumer Chemicals business unit fell by 2% to 715 million euros (third quarter of 2019: 726 million euros), and adjusted EBITDA increased by 18% to 140 million euros (consensus forecast : 142 million euros; the third quarter of 2019: 119 million euros).

Smart Materials Business Unit: Most of the inorganic materials in the product portfolio exhibit strong toughness, especially catalysts and hydrogen peroxide. The epidemic has driven demand for sanitary products, personal care and environmental protection applications. In the automotive sector, businesses related to vehicle maintenance have clearly recovered, and businesses related to automakers have gradually improved. In the third quarter of 2020, sales of the smart materials business unit fell by 5% to 790 million euros (third quarter of 2019: 833 million euros), and adjusted EBITDA fell by 13% to 137 million euros (consensus forecast: 124 million euros) Euros; third quarter of 2019: 157 million Euros).

Functional materials business department: With the gradual rebound in sales and the increase in the naphtha price gap in the carbon 4 value chain, the business development of the department is gradually passing through the low period. In the third quarter of 2020, sales of the functional materials business unit fell 27% to 444 million euros (third quarter of 2019: 607 million euros), and adjusted EBITDA fell 43% to 28 million euros (consensus forecast: 24 million euros) Euros; third quarter of 2019: 49 million Euros).