Evonik published preliminary figures for the second quarter. The company expects adjusted EBITDA of between €430 and 450 million, a slight improvement compared with the first quarter (€409 million). Strict contingency measures had a supportive effect on earnings. However, the lack of an economic recovery means that earnings fell short of Evonik’s expectations. Compared with the prior-year period, adjusted EBITDA fell by around 40%.

"During the first quarter, there were signs of a business recovery for the remainder of the year," says Christian Kullmann, Chairman 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." 

In the second quarter, demand remained very weak across all end markets, and customer destocking continued. Volumes sold remained at the very low level of the previous quarter. Particularly in its specialty chemicals businesses, Evonik nevertheless succeeded in keeping prices stable for the most part. Group sales reflected the weak economic trend as well and are expected at close to €4 billion in the second quarter. 

Already in the second half of 2022, Evonik began to implement contingency measures to safeguard earnings. The company aims to save €250 million in the current year by not filling vacant positions, limiting external service providers, and restricting travel. The effects of these measures will continue to ramp-up in the second half of the year. 

"We also need additional efforts for free cash flow. We will reduce capital expenditure and net working capital even further," says Chief Financial Officer Maike Schuh. Evonik postponed or canceled smaller capacity expansions and projects in light of persistently weak demand and now expects capital expenditures of around €850 million for 2023. At the start of the year, Evonik had already cut its investment budget from €975 to 900 million.

"We haven't seen such persistently weak sales volumes in a long time, perhaps never before over such a long period," says Kullmann. "We outlined contingency measures at an early stage and are now implementing those measures rigorously. Nevertheless, we will no longer be able to meet our previous guidance." 

Evonik now assumes continued weakness in demand without any recovery throughout the second half of the year. Accordingly, adjusted EBITDA for the full year 2023 will be in the range of €1.6 to 1.8 billion. Previously, Evonik had expected adjusted EBITDA in the range between €2.1 to 2.4 billion, with the company recently targeting only the lower end.

Sales are now expected between €14 and 16 billion (previously: €17-19 billion). Evonik holds firm to develop its cash conversion rate toward the target of around 40 percent this year (2022: 32 percent). However, the initially targeted absolute increase in free cash flow is no longer achievable with the lower operating result. 

Evonik will publish final results for the second quarter on August 10, 2023.