Evonik amends full-year outlook on slower than expected recovery
The German specialty chemicals company published preliminary financial data today for Q2 2023.
Demand remained very weak across all end markets, and customer destocking continued. Volumes sold remained at the exceptionally low level of the previous quarter, it reported.
"During the first quarter, there were signs of a business recovery for the remainder of the year," said Christian Kullmann, chair of the executive board. "Unfortunately, the recovery turned out to be much weaker in May and June than we had expected. Our contingency measures prevented a more significant earnings decline, but we are feeling the effects of a slowing global economy."
The amino acids maker said it will no longer be able to meet its previous guidance.
"We haven't seen such persistently weak sales volumes in a long time, perhaps never before over such a long period," commented Kullmann.
Evonik added that it now assumes continued weakness in demand without any recovery throughout the second half of the year. It anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the full year 2023 will be in the range of €1.6bn to €1.8bn.
Previously, the supplier had expected adjusted EBITDA in the range between €2.1bn to €2.4bnn, with it recently targeting only the lower end. Sales are now expected between €14bn and €16bn (previously: €17-€19bn), it reported.
Evonik said it will publish final Q2 2023 results on August 10.
Restructuring
In April this year, the producer announced it was revamping its animal nutrition operating structure, with it looking to shed 200 jobs
Evonik said it would be separating its amino acids and specialties businesses into two distinct operating models, adding that the move would allow it to adapt to market dynamics, ensuring competitiveness and enabling further profitable growth.
The company was also looking to optimize the production setup for the manufacture of its DL-methionine product, MetAMINO, at its three global production hubs, with the idea of improving the ecological footprint at those facilities too.
The measures would result in cost savings of €200m (US$219.5bn) with a percentage of those gains being realized in the current year, and the full amount in the 2025 fiscal year, it noted.
“Animal nutrition is a strong and profitable business for Evonik. The market is undergoing structural changes, and it is important that the company, as one leader in this market, adapts its operating model in accordance with the industry. The setup of two dedicated operating models for amino acids and specialties is a logical consequence,” a spokesperson told us in April.
The market environment for amino acids is characterized by unchanged sturdy growth and an attractive sustainability profile but it is also challenged by rising raw material and energy costs, explained the firm then.
Evonik said it is targeting a streamlined amino acids operating model focused on efficiency and cost-leadership. “This go-to-market approach will be characterized by a lean sales organization with strong digital competence and processes to benefit the customer.”
The specialty nutrition division includes functional feed additives and digital tools; that will be developed into a business with system solutions and specialties for poultry, swine, and ruminants. “We will focus on new product developments and offerings through partnering with industry leaders, i.e., phytogenics," said the spokesperson.
