MOSCOW (MRC) -- Evonik Industries says its net profits in the second quarter of 2020 were 50% lower on a year-on-year (YOY) basis, at EUR114 million (USD134 million), on sales of EUR2.83 billion, 14% down on the same period of the previous year, said Chemweek.
This result is attributed to significantly weaker demand in some markets, the company says. Adjusted EBITDA beat analysts’ consensus estimate by 9.5%, but was 19% lower YOY, at EUR456 million, it says. Adjusted EBIT fell 41% YOY, to EUR202 million, Evonik says.
"In the second quarter we felt the effects of the pandemic. However, the strategic portfolio changes and the implementation of our efficiency programs contributed to the fact that we got through the first half of the year better than initially expected. This is especially true for our strong growth segments," says Christian Kullmann, chairman of Evonik.
The company’s nutrition and care business recorded a 4% YOY decline in sales, to EUR1.09 billion, and adjusted EBITDA rose by 14%, to EUR217 million, Evonik says. Higher selling prices and increased demand benefited essential amino acids for animal nutrition, it says. The healthcare segment “once again recorded a pleasing development in pharmaceuticals and food ingredients, as well as pharmaceutical polymers. However, additives for polyurethane foams experienced a decline in demand,” Evonik says.
Sales of the resource efficiency business fell by 14%, to EUR1.24 billion compared with EUR1.44 billion in the second quarter of 2019, the company says. Adjusted EBITDA declined 22% YOY, to EUR255 million. Most of the business’s segments were significantly affected by the decline in demand, Evonik says. With the exception of crosslinkers and active oxygen products, “the global economic slowdown and cutbacks in production by customers, especially in the automotive sector, led to a decline in sales volumes of high-performance plastics, silica, and silanes for the tire industry. Demand for oil additives also declined while others remained stable," the company says.
The performance materials business posted a significant YOY drop in sales of 42%, to EUR319 million that led to an 85% decrease in adjusted EBITDA, to EUR11 million, the company says. The massive drop in the oil price had an overall negative impact on the business, and the decline in demand, especially from the automotive and oil industries, hurt functional solutions, with performance intermediates the segment affected the most, Evonik says.
"Free cash flow was significantly positive at €96 million. Lower bonus payments and tax reimbursements more than compensated for the effects of lower operating profit and an increase in net working capital," the company says.
During the crisis, "we have shown high cash- and cost discipline," says Ute Wolf, CFO at Evonik. "We are starting to see initial signs of recovery in some markets. However, there is still no question of a general economic recovery. The corona crisis is not yet over," Wolf says.
For the full year 2020, Evonik has confirmed its outlook published on 7 May and expects sales of EUR11.5-13.0 billion as well as adjusted EBITDA of EUR1.7-2.1 billion.
We remind that Dow plans to install a new furnace in its steam cracker at Fort Saskatchewan, Alberta, Canada, increasing its ethylene capacity, currently 1.42 million metric tons/year (MMt/y), by 130,000 metric tons/year. Dow will split the cost of the project and the incremental volume equally with an unnamed regional customer, according to CEO Jim Fitterling, who announced the news during the company's fourth-quarter earnings call. Start-up is slated for the first half of 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
Evonik is one of the world leaders in specialty chemicals. The focus on more specialty businesses, customer-oriented innovative prowess and a trustful and performance-oriented corporate culture form the heart of Evonik’s corporate strategy. They are the lever for profitable growth and a sustained increase in the value of the company. Evonik benefits specifically from its customer proximity and leading market positions. Evonik is active in over 100 countries around the world with more than 36,000 employees.