Evonik misses estimates in fourth quarter, hits full-year targets

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

OMV to invest USD36 million in glycerin-to-propanol pilot plant in Austria

MOSCOW (MRC) -- OMV (Vienna, Austria) says it will invest EUR30 million (USD36 million) building a glycerin-to-propanol pilot plant at its refining and petrochemicals complex at Schwechat, Austria, with the propanol produced to be used as a sustainable feedstock for chemicals, in addition to being a bio-additive for gasoline, reported Chemweek.

Construction is scheduled to start in the second quarter of 2021, with the unit to be operational in 2023, it says. The plant will use a catalyst developed inhouse by OMV to produce propanol from waste-based glycerin, a byproduct from biodiesel production. The propanol will be used mainly as a bio-additive to reduce gasoline’s carbon dioxide (CO2) footprint, but with other applications to include as a “sustainable feedstock for the chemicals market as a replacement for fossil-based propanol,” it says.

The pilot plant investment follows five years of research, says OMV. The new unit will be located adjacent to the company’s ReOil plant, which produces synthetic oil from waste plastic for use in nearby olefins and polyolefins plants operated by its subsidiary Borealis, so that both facilities can utilize a single measuring station and synergies, it says.

The pilot plant’s capacity of 1.25 million metric liters/year of propanol will lead to an estimated reduction in CO2 emissions of around 1,800 metric tons/year, it says. OMV says the long-term plan is to commercialize the glycerin-to-propanol technology to produce around 125 million liters/year of propanol and reduce CO2 emissions by around 180,000 metric tons.

OMV last month announced it would invest about EUR25 million, in partnership with Kommunalkredit, building an electrolysis plant for the production of green hydrogen at Schwechat. The 10-megawatt (MW) polymer electrolyte membrane (PEM) electrolysis facility will produce up to 1,500 metric tons/year of renewable hydrogen, with the plant expected online in the second half of 2023.

As MRC informed earlier, OMV (Vienna, Austria) says it is investing EUR40 million (USD48 million) to expand and modernize a steam cracker and associated units at its refining and petrochemicals complex at Burghausen, Germany. The upgrade will increase the site’s ethylene and propylene production capacity by 50,000 metric tons/year. Following a planned turnaround of the refinery, the revamped cracker and petchem units are expected to start operations in the third quarter of 2022. Initial groundwork is already underway ahead of the upgrade.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
MRC

LANXESS increases prices for hexanediol

MOSCOW (MRC) -- Specialty chemicals company LANXESS is raising its prices for 1,6-hexanediol (HDO) globally with immediate effect. The increase amounts for EUR 800 per metric ton, said the company.

HDO is an important precursor for high performance coatings, fibers, adhesives, polyurethanes, polycarbonate diols, and as reactive diluent for epoxy resins.

As per MRC, LANXESS announced force majeure at its maleic anhydride plant in Baytown, Texas, due to a shortage of raw materials and a safety shutdown. The capacity of the company's plant in Baytown is 75,000/tonne.

Maleic anhydride is a raw material for the production of tetrahydrofuran, tetrahydrophthalic anhydride, films and synthetic fibers, pharmaceuticals, detergents, plasticizers, maleic, succinic, fumaric and malic acids and a number of agricultural chemicals.

Plasticizers are substances introduced into a polymer material to make it elastic and plastic during processing and operation. In particular, plasticizers are used for the production of polyvinyl chloride (PVC). The share of plasticizers used for the production of PVC products is about 80%.

According to the ICIS-MRC Price Report, price discussions for March supplies of Russian PVC began; supplies of Russian PVC with K64 / 67 were discussed in the range of Rb116,000-120,000/tonne CPT Moscow, including VAT, for volumes up to 500 tonnes, against Rb112,000-115,000/tonne CPT Moscow, including VAT in February.

LANXESS is a leading specialty chemicals concern with a turnover of EUR7.2 billion in 2018. The group employs approximately 15,400 people in 33 countries. Currently, the concern includes 60 manufacturing enterprises. LANXESS's core business is the development, production and marketing of chemical intermediates, additives, specialty chemicals and plastics.
MRC

COVID-19 - News digest as of 05.03.2021

1. Chinese demand recovery hopes fade for Atlantic Basin crude sellers

MOSCOW (MRC) -- With barrels of crude oil that will arrive in China in May now changing hands, hopes that demand from its refiners for African and European crude would tick higher following spring maintenance may have been premature, reported S&P Global. After a bumper 2020 for sales to China, 2021 has got off to a slow start with demand for long-haul crude hit by higher flat prices, refinery maintenance season and fresh restrictions on mobility on the back of an uptick in coronavirus levels which coincided with Lunar New Year celebrations. About 50 million mt/year of refining capacity at six state-owned refineries - five Sinopec and one CNOOC - was expected to be shut over the March-April period, while May could also witness some maintenance, albeit at a relatively lower level, industry data and information collected by S&P Global Platts showed.


MRC

Crude oil futures rise as OPEC+ rolls over production cuts, stronger US dollar slows rally

MOSCOW (MRC) -- Crude oil futures rose during mid-morning trade in Asia March 5, even as a stronger US dollar slowed the rally triggered by the OPEC+ decision to keep production quotas largely steady in April, reported S&P Global.

At 11:14 am Singapore time (0314 GMT), the ICE Brent May contract was up by 68 cents/b (1.01%) from the March 4 settle to USD67.42/b, while the April NYMEX light sweet crude contract was up by 60 cents/b (0.94%) to USD64.43/b.

The overwhelmingly bullish sentiment in the oil market was held back slightly by the rapid appreciation in the US dollar, which made crude more expensive for buyers holding other currencies. At 11.00 am in Singapore, the March ICE US dollar index futures were trading at 91.670, up 0.801% from the March 4 settle.

"The markets are on a bit of a fence this morning despite the bullish OPEC+ decision, as rising treasury yields and safe haven demand has pushed the US dollar up, and a risk-off sentiment has gripped the markets," Pan Jingyi, senior market strategist at IG, told S&P Global Platts March 5.

The appreciation in the dollar has provided some resistance to the surge in oil prices after the OPEC+ alliance decided to keep production quotas largely steady for the month of April, with Saudi Arabia extending its unilateral 1 million b/d output cut indefinitely. Only Russia and Kazakhstan were granted 130,000 b/d and 20,000 b/d increases in their production quota, respectively.

The coalition's decision means that it will keep 8 million b/d of crude production - or roughly 8% of pre-pandemic supply - off the market for at least another month. The oil market reacted by sending the Brent and NYMEX light sweet crude markers hurtling 4.17% and 4.16% higher to settle at USD66.74/b and USD63.83/b, respectively, on March 4.

Delegates to the OPEC+ meeting said the decision was prompted by lingering uncertainty over the economic recovery, which could still be derailed by uneven vaccine rollouts and stringent lockdown measures.

"I belong to the school of being conservative," Saudi Arabia's energy minister Prince Abdulaziz bin Salman said after the meeting, having earlier told OPEC+ that "the right course of action now is to keep our powder dry, and to have contingencies in reserve to insure against any unforeseen outcomes."

The OPEC+ decision came as a surprise to the market, which had braced itself for the possibility of a significant increase in the coalition's supply from April onwards, and had at the very least expected Saudi Arabia to end its 1 million b/d production cut.

"Expectations were high for the Saudis to end their voluntary 1 million b/d cut and for the group to collectively raise output by 500,000 barrels," Edward Moya, senior market analyst at OANDA, said in a March 5 note.

"Oil prices could rip higher now that a tight market is likely up through the summer. WTI Crude at USD75/b no longer seem outlandish and Brent could easily top $80/b by the summer," Moya added.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
MRC