Evonik increased the adjusted EBITDA by 8% to €485 million in the third quarter 2023 versus the second quarter, also thanks to strict cost discipline. Due to persistently weak demand, the adjusted EBITDA fell by 21% year-on-year.

“The economic recovery is still a long time coming,” says Christian Kullmann, chairman of the Management Board. “That is why we are focusing on the levers at our disposal. And that is increasingly having an effect.”

Group sales fell 23% in the third quarter to €3.77 billion. Sales volumes declined by 5%, and prices by 6%. For methionine, prices bottomed out in the third quarter and have improved slightly since. The business also realized initial savings effects from the ongoing transformation program of the business line Animal Nutrition.

Free cash flow in the third quarter increased by 63% to €469 million, driven by prudent working capital management and investment discipline. Cash generation in the first nine months was also higher than in the previous year, despite significantly lower adjusted EBITDA. Evonik remains committed to increasing the cash conversion rate toward its target of 40% in the current year. In 2022, the ratio was 32%.

“Our focus on cash is paying off,” said CFO Maike Schuh. “We will also benefit from this in the fourth quarter. To strengthen our financial foundation, we will continue to rigorously scrutinizing investments and other expenditures in the coming year.”

Since the second half of 2022, Evonik has been implementing measures to safeguard earnings, such as not filling vacant positions, not using external service providers and cutting down on business travel. As of Sept. 30, the company had already saved about €175 million, which amounts to 70% of the €250 million savings target for 2023. Fixed costs for the group are now clearly below the level of the previous year. The measures will continue in 2024.

Evonik generated a net loss of €96 million in the third quarter. This resulted from weaker business performance and impairment losses. Evonik realized a €233 million impairment on Superabsorbents ahead of the planned divestment of the business. In 2022, the Group earned €214 million in the same period.

In September, Evonik sharpened its corporate strategy: Two major units are being strategically reorganized to focus resources more closely on the operating business of the three growth divisions.

The Technology & Infrastructure Division is being split up. In the future, the Technology Division will benefit from a global pooling of competencies independent of locations. The chemical parks in Marl and Wesseling, Germany, as well as in Antwerp, Belgium run by the Infrastructure Division will become legally independent. The aim is to improve financing options so that the infrastructure of the sites will remain high quality.

Less complexity and clearer responsibilities will be brought about by Evonik Tailor Made. The program will create an administration tailored to Evonik’s specific needs: A new organizational design will enable faster decisions and more efficient processes. This will make the administration more cost-efficient, partly by removing management layers.

Evonik assumes continued weak demand without recovery for the remainder of the year and confirms the outlook issued in August. Full-year adjusted EBITDA for 2023 is expected to be between €1.6 billion and €1.8 billion on sales of €14 billion to €16 billion. Evonik will limit capital expenditures to around €850 million in the current year.

Third-quarter sales in the Specialty Additives division decreased by 21% to €882 million. The decline resulted from lower volumes, negative currency effects, and falling selling prices. The prior-year figure also included sales from the TAA derivatives business, which was divested at the end of 2022.

Products for the construction and coatings industry saw softening demand in all regions and slightly declining selling prices, generating significantly lower sales. Sales of additives for polyurethane foams and consumer durables also declined due to lower volumes and softening selling prices. Additives for the automotive sector recorded lower volumes, while selling prices declined slightly due to the passing-on of lower raw material costs.

Adjusted EBITDA was 29% below the prior-year figure at €173 million. The adjusted EBITDA margin fell to 19.6% from 21.8% in the prior-year quarter.