Evonik significantly raises expectations after Q2 2024 results

Evonik posted significantly higher earnings in the second quarter of 2024 despite the ongoing difficult economic environment. Adjusted EBITDA rose by 28% to €578 million compared with the previous year. Free cash flow was clearly positive at €217 million, compared with a cash outflow of €203 million in the prior-year period.

“We are cutting costs and doing our homework,” said CEO Christian Kullmann of the ongoing restructuring program. “At the moment, we have to rely mainly on ourselves, as there are no real tailwinds in the economy.”

Group sales rose by 1% to €3.93 billion in the second quarter compared with the same period last year. Prices fell by 2%, partly due to lower raw material costs. In contrast, prices in the animal nutrition business continued to recover. Evonik’s volumes rose by 5%.

Volume growth in specialty additives stood out, with double-digit growth. In addition to continued strict cost control, lower production costs also contributed to the improved performance. The adjusted EBITDA margin rose by 3.1 percentage points to 14.7%.

“We are heading in the right direction and the improvement in our key financial figures compared to the previous year is really encouraging,” said CFO Maike Schuh. “However, the current recovery is in contrast to a very weak 2023, and we are still a long way from achieving our targets.”

On July 15, 2024, Evonik raised its expectations for adjusted EBITDA for 2024. The company now expects this indicator to be between €1.9 billion and €2.2 billion (previous range: €1.7 billion to €2 billion). The expectations for the other key financial figures remain unchanged: Sales should amount to between €15 billion and €17 billion. Evonik expects a cash conversion rate of around 40% and a significantly higher ROCE. Evonik expects adjusted EBITDA in the third quarter to be at the same level as in the second quarter. The Evonik Tailor Made efficiency program will bring initial savings from the end of this year. Negotiations on the framework for the socially responsible redundancies in Germany have been concluded. Evonik made provisions of EUR 238 million in the second quarter to implement these redundancies.

Excluding the provisions, general and administrative expenses in the first half of the year had fallen by 5% compared to the same period last year. The provisions were also the main reason for the net income of -EUR 5 million in the second quarter. In the same period last year, the net loss was -EUR 270 million.

The sale of the superabsorbents business is expected to be completed this quarter. Two of the three original business lines in the Performance Materials division will change hands.

Sales of Specialty Additives increased by 4% to EUR 944 million in the second quarter of 2024, driven by significantly higher volumes. Sales prices fell, mainly due to lower raw material costs and slightly negative currency effects. Sales were also higher than in the previous year, driven by significantly higher demand for products in the paints and coatings industry, especially in Europe and Asia.

Sales of additives for polyurethane foams and consumer durables increased slightly, despite lower prices, due to higher volumes. Sales of additives for the automotive industry were significantly higher than in the previous year, due to higher volumes worldwide. Demand for crosslinkers also increased significantly, although sales were still below the previous year's figure due to lower prices.

Adjusted EBITDA increased by 11% to EUR 220 million, driven by higher volumes, higher plant utilization and lower raw material costs. The adjusted EBITDA margin improved to 23.3% from 22.0% in the prior-year quarter.