UpdateGermany’s Evonik expects higher sales in 2013

12 March 2013 12:04  [Source: ICIS news]

(adds outlook and further company statement throughout)

By Franco Capaldo

LONDON (ICIS)--Evonik Industries expects sales to be higher in 2013 on the back of new production capacities and rising demand, the Germany-based specialty chemicals major said on Tuesday.

The company added that operating results for the full year should be in line with the levels reported in 2012.

“At present, a rapid recovery of the global economy does not seem very likely. Moreover, the smoldering sovereign debt crisis in Europe is still causing considerable uncertainty that could hold back economic development.

“Nevertheless, Evonik expects to report another successful business performance in 2013,” the company said.

“While the economic situation will remain challenging, from the present vantage point, implementation of our first growth investments will make a positive contribution,” it said.

In 2014, the group expects that, driven by higher demand, sales and the operating results will be considerably higher than in 2012 and 2013.

“Based on the present assessment of the situation, this should be driven partly by higher production capacity, which Evonik anticipates will enable it to derive above-average benefit from the expected market growth,” it said.

In an annual financial earnings statement, the company also announced that its "Evonik 2016" corporate programme is “progressing rapidly”.

Evonik intends to invest more than €6bn ($7.8bn) between 2012 and 2016 as part of a growth strategy in order to expand its market positions, with a “considerable proportion of the growth projects will be implemented in emerging markets”.

These projects include the construction of a new production complex for the amino acid DL-methionine in Singapore, which is scheduled to come into service in 2014, while in Jilin, north China, Evonik is building new plants for hydrogen peroxide and organic surfactants, which should come on stream by year-end 2013, and a facility for isophorone and isophorone derivatives, which should be completed by 2014.

Meanwhile, Evonik is investing around €200m to build three new plants in South America that are due to start up in 2014. In Brazil, plants are being erected for its amino acid Biolys and for cosmetic raw materials, while in Argentina a plant for catalysts for biodiesel production is under construction.

On Tuesday, Evonik reported that its 2012 fourth-quarter net income rose 86% year on year to €276m despite a fall in sales “due to tax effects”, while group sales for the three months ended 31 December slipped by 2% year on year to €3.27bn “in the wake of a drop in selling prices but slightly higher volumes”.

Evonik said: “The economic slowdown in the fourth quarter of 2012 and destocking by customers impacted Evonik's business performance.”

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter fell 6% to €492m, while adjusted earnings before interest and tax (EBIT or operating profit) dropped 3% to €336m.

“The adjusted EBITDA margin was 15.0%, slightly below the level reported for the fourth quarter of 2011 (15.7%),” Evonik added.

Net income for the 12 months of 2012 was €1.16bn, up by 15% from 2011, although full-year sales fell by 6% to €13.6bn, which is mainly due to the divestment of the group’s carbon black business in July 2011.

Evonik’s organic sales growth weakened slightly in the second half of the year. Although selling prices were slightly higher (+1%), 2012 organic sales slipped slightly by 1% as a result of a 2% decline in volumes partly because of a volume shortfall following an explosion at its cyclododecatriene (CDT) plant at the Marl chemical park, Germany, in April 2012.

Adjusted EBITDA in 2012 declined by 6% to €2.59bn, mainly because the prior-year figure contains earnings from the carbon black business for the first seven months. Accordingly, adjusted EBIT dropped 7% to €1.95bn.

Chairman Klaus Engel said: “Operationally, in 2012, Evonik was able to build on the record earnings achieved in 2011, greatly increased investment and also stepped up the pace of innovation."

With reference to the company's intention of seeking a stock market listing, Engel said: “We are ready for the next big step … The strong interest shown by investors in connection with the private placements confirms the success of our growth strategy.”

The return on capital employed (ROCE) in 2012 fell to 17.2% from 18.7% in 2011, mainly caused by higher capital expenditures (capex) which rose by 30% to €1,08bn.

($1 = €0.77)

By: Franco Capaldo
+44 (0)20 8652 3214

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