Evonik 'out of the woods' from coronavirus impact by April after €30m hit in Q1 - CEO

Author: Morgan Condon

2020/03/04

ESSEN, Germany (ICIS)--Evonik estimates that it will be "out of the woods" over the negative impact from coronavirus by April after first-quarter earnings were hit by the outbreak, the CEO at the Germany-headquartered chemicals producer said on Wednesday.

The company announced at its 2019 full year results that it has revised down adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the first quarter by €30m to account for the coronavirus impact.

Despite the coronavirus-related hit to EBITDA, and falling sales reported for 2019, Evonik's stock was trading 1.5% higher by Wednesday afternoon, compared to the previous close. At €23.35 per share, Evonik's stock is trading far from its peak at slightly more than €37 per share in 2015.

“By the end of Q1 we will be out of the woods [regarding the impact of coronavirus], since we expect the worst will then be behind us,” said Evonik's CEO and chairman Christian Kullmann, speaking to reporters at the company's headquarters in Essen, Germany.

“On the one hand, we see strong positive elements [in our operations] not affected by coronavirus. But on the other hand [disruption in China has caused] this impact of €30m, which has been included in the guidance [for 2020].”

Evonik went through some production issues in 2019, but they pertained to supply chain problems not related to the outbreak, which started affecting China's manufacturing sectors by the end of January and February.

The company said all its sites in China are back up and running, adding that none of its employees in the country had contracted the virus.

“After Lunar New Year [China's biggest holiday, at the beginning of February] all production started again, as with many companies. Given the logistics restrictions, we have some minor logistics problems for raw material supplies, but this did not restrain production,” said deputy chairman of the executive board Harald Schwager.

FURTHER INTO SPECIALTIES
During 2019, Evonik has made advances in some downstream industries and that protected it from a higher coronavirus impact, according to Schwager.

The executive cited, for example, food supplies, which are given preferential treatment as they are treated as necessary products.

On other instances, business lost in the first quarter is unlikely to be recovered later in the year.

“Lipstick is an example. If you don’t [produce] lipstick in the first quarter, you will not use twice as much in second quarter,” Schwager added.

TRADE SHOWS OFF THE TABLE
Due to the coronavirus outbreak spreading globally, several petrochemicals conferences and trade shows have been cancelled.

Evonik's executives said the firm has guidance in place for its employees and how they can protect themselves from the outbreak; it uses a traffic light system to assess risk in individual countries, and then down to regions and cities within countries.

“We also focus on communication, we repeatedly inform our employees and many other companies, trying to limit risks," said Evonik's chief human resources officer and industrial relations director Thomas Wessel.

"We are not holding big executive meetings, and we are also trying to drive down participation in trade shows."

Evonik is paying attention to its key production plant in Marl, Germany, which employs 7,000 people, and making everything it can for the site not to  be quarantined.

The site's uses around 2,000 contractors, including employees from the north of Italy, the European area most affected by coronavirus.

Evonik said it is continuously working with contractors to scale down the risk factors.

After several companies have pulled out in the past few days, earlier on Wednesday the US' trade group the American Fuel & Petrochemical Manufacturers (AFPM) was prompted to say it is still planning to run its International Petrochemical Conference (IPC) in New Orleans at the end of March.

AFPM was forced to give reassurances after several companies have already announced they will not take part in this year's IPC, which is the largest gathering for the global petrochemicals industry.

Sources in the market have said IPC is also likely to be postponed or cancelled.

A growing number of industry events have been postponed or cancelled because of the ongoing coronavirus outbreak.

These include the Asia Petrochemical Industry Conference (APIC) in New Delhi; the International Fertilizer Association (IFA) annual conference, also in Delhi; the European Petrochemical Luncheon (EPL) in Madrid; and CERAWeek in Houston.

The World Petrochemical Conference, which runs the week before IPC and was aso going to be held in New Orleans, has also been cancelled.

Front page picture: Evonik's headquarters in Essen
Source: Friedemann Vogel/EPA-EFE/Shutterstock

Focus article by Morgan Condon

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