MOSCOW (MRC) -- Evonik Industries reports fourth-quarter net profit of EUR73 million (USD88 million), down 54% from the corresponding period of the previous year, on a 2% decline in sales, to EUR3.2 billion, according to Chemweek.
The fall in net profit reflects the inclusion in the prior-year period of proceeds from the sale of the company’s methacrylates business, the company says. Weaker demand, caused by COVID-19, drove down sales.
Evonik’s fourth-quarter adjusted EBITDA decreased 17% year on year (YOY) to EUR418 million, 4.3% below analysts’ consensus estimate, on a EUR15-million adjusted EBITDA loss at the company’s services operation, which swung from positive adjusted EBITDA of EUR24 million in the year-earlier period. Services’ external sales declined 15% YOY to €188 million in the quarter on lower revenue from process technology and engineering.
Evonik says it achieved its full-year 2020 financial targets partly as a result of measures taken to tackle the pandemic. Last May, Evonik was one of the few companies to give an outlook for the full year. The company says that with 2020 adjusted EBITDA of EUR1.91 billion and sales of EUR12.2 billion, the target was fully met. Adjusted EBITDA decreased 11% and sales were down 7%.
"The pandemic impacted our actions, but it did not determine our agenda," Christian Kullmann, chairman of Evonik, told a press briefing on Thursday. "We kept Evonik on track."
Evonik’s results in 2020 also benefited from the company’s strategy to focus more on its specialty businesses, which has included the methacrylates divestment. "In the crisis, our transformation towards more specialty chemicals has paid off," says Kullmann. "We are in the midst of this transformation process, which we will continue to drive forward, and which will generate new growth in 2021 and beyond."
Evonik forecasts adjusted EBITDA of at least EUR550 million in the first quarter of 2021. For the full year, the company expects a rise in adjusted EBITDA to EUR2.0-2.3 billion on sales of EUR12-14 billion. “We fended off the crisis in 2020 and now we are switching to growth,” Kullmann says.
Measures taken last year enabled Evonik to increase its free cash flow to EUR780 million and double the cash-conversion rate to above 40%. "We raised our forecast for free cash flow twice during the year and then even exceeded that," said Ute Wolf, CFO, at the briefing. "Our outlook points in a clear direction: We expect rising earnings, a persistently high cash-conversion rate, and thus an increase in free cash flow in 2021."
Evonik also expects to exceed its cost-cutting target for 2021. The company announced a program in 2017-18 to reduce selling and administrative expenses by an annualized EUR200 million by the end of 2021. The company says it will likely have reached EUR230 million of cost cuts by the end of this year, having achieved EUR60 million of cost reductions in 2020, Kullmann says. “In past years cost discipline was not a particular strength of Evonik, but this has changed,” he told the press briefing.
Evonik announced 1,000 job cuts as part of the cost-reduction plan and has not reached the full number of reductions, Thomas Wessel, board member/human resources and industrial relations, told the briefing. “We remain below that target but are nevertheless achieving the cost cuts,” he said.
Evonik launched a new corporate structure in July 2020, consisting of four operating divisions. Three of the divisions - specialty additives, nutrition and care, and smart materials - have been designated as growth divisions and their combined full-year 2020 earnings were down by just 3%. The other operating division is performance materials.
The three growth divisions now account for about 95% of the operating business’s earnings, Evonik says. The reorganization has made Evonik “more comparable with our competitors,” Kullmann told the press briefing.
Sales at the specialty additives division declined 5% to EUR3.23 billion in 2020 with adjusted EBITDA down 3% to EUR857 million. Demand for additives for the automotive and coating industries initially declined significantly due to the challenging economic situation but showed a “clear recovery” at the end of the year, Evonik says. Additives for products in the construction industry and renewable energies saw robust demand throughout the year, it says.
Sales at the nutrition and care business rose 2% to EUR2.99 billion in 2020 with adjusted EBITDA rising 21% to EUR560 million, mainly due to improved selling prices and “successful cost management,” Evonik says. At the animal nutrition segment, essential amino acids generated higher sales than in the previous year. In the methionine business, sales volumes increased with higher demand worldwide. Overall, selling prices were stable in the second half of the year, the company says.
The smart materials division's sales decreased 4% to EUR3.24 billion in 2020 as adjusted EBITDA fell 19%, to EUR529 million. Business was particularly affected by the worldwide economic slowdown in the second- and third quarters but was able to return to the previous year's level in the fourth quarter, Evonik says. Overall, however, this led to a “noticeable decrease” in volumes, it says. This was particularly the case for high-performance plastics for the automotive sector, and for silica used in the tire industry. The first-time inclusion of PeroxyChem, acquired in February 2020, had a positive earnings contribution, Evonik says.
Revenue at the performance materials division fell 25% to EUR1.98 billion in 2020. Adjusted EBITDA decreased by 65% to EUR88 million. Sales of C4-based products decreased as a result of weakening demand, particularly from the automotive and fuel industries. The superabsorbents business, which Evonik is carving out, faced below-average capacity utilization across the industry, the company says. However, Kullmann expects the business to “catch up a lot” in 2021.
As MRC informed earlier, in February, 2020, Dow and Evonik entered into an exclusive technology partnership. Together, they plan to bring a unique method for directly synthesizing propylene glycol (PG) from propylene and hydrogen peroxide to market maturity.
Propylene is the main feedstock for the production of polypropylene (PP).
According to MRC's ScanPlast report, PP shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).
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.
MRC