New capacity, savings help Evonik’s Q4 net income jump 60%

(Adds information on divisions performance from paragraph 6)

LONDON (ICIS)–Evonik’s net income rose by 60% year on year to €152m in the fourth quarter of last year on the back of higher operating earnings, the German specialty chemicals firm said on Tuesday.

The company’s sales rose by 4% year on year to €3.23bn in the fourth quarter of last year while its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was up by 18% at €442m, the company said in a statement.

Evonik’s income after taxes from continuing operations surged by 46% year on year to €153m in the fourth quarter, the company said.

For the full year of 2014, the firm’s net income fell by 72% year on year to €568m, despite a 2% increase in sales to €12.9bn, it said.

Its adjusted EBITDA slipped by 6% year on year to €1.87bn while income after taxes from continuing operations was up by 1% at €590m, the company added.

“Evonik expects to report slightly higher sales for fiscal 2015. Adjusted EBITDA should also be slightly higher than in the previous year,” it said.

Evonik said its operating earnings had increased on the back of new production capacities coming on stream and its cost reduction programme. The new sites are all in China: in Shanghai for production of isophrone, in Jilin for H2O2 and in Singapore for methionine.

“We did our homework and are now poised for a new phase of profitable growth. Our new group structure allows far more differentiated management of the various business and more targeted development,” said Klaus Engel, Evonik’s chairman.

By divisions, Evonik benefited from a strong rise in sales at Consumer, Health & Nutrition of 7% to €1.37bn in the fourth quarter of 2014 year on year, while its EBITDA rose 37% to €272m.

The good results were due to good performance in North America of its subdivision Personal Care, which suffered softer demand in Europe, said Evonik. The company added contract manufacturing business had accelerated at the end of 2014.

Specialty Materials registered in the fourth quarter sales at €1.06bn, flat compared to the same quarter of 2013, although EBITDA suffered with a  fall of 3% to €92m on the back of lower prices, especially in C4 which led to inventory revaluations.

Within the division, Evonik said acetone methyl methacrylate (MMA) had suffered the “usual seasonal slowdown” during the fourth quarter, although it had benefited from tight supply in Europe and supportive end-market environment.

Polymethyl methacrylate (PMMA) also suffered on seasonal slowdown although less pronounced than in the fourth quarter of 2013. “Prices increases [were] successful but overcapacities in Asia persist. Demand for High Performance Polymers seasonally slower, utilization still below pre-accident level,” said the company.

Resource Efficiency posted gains both in sales and EBITDA, up 8% to €774m and 7% to €150m respectively.

In this division, silica benefited from good performance at most applications, said Evonik, with strong demand coming from North America and Asia, where demand for tyres was consistent.

The company’s smallest division, Services, managed to grow sales 1% to €232m during the quarter but its EBITDA took a hit with a decrease of 15% to €22m, said Evonik.

Looking ahead, the company said sales and earnings could be affected positively by exchange rates in 2015 were the average euro/dollar exchange rate to remain unchanged from its current levels.

“The earnings impact of lower raw materials [due to the fall in oil crude prices] on individual businesses will vary, but should largely balance out across the portfolio as a whole,” concluded Evonik.

Additional information by Nurluqman Suratman