Evonik closes the second quarter with strong results. Sales increased 31 percent year-on-year to €4,772 million due to higher selling prices and positive currency effects, despite slightly lower volumes. Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) increased by 12 percent to €728 million.
“We had a strong first half of the year, and once again have successfully managed the challenges around us,” said Christian Kullmann, Chairman of the Executive Board. “Regarding the increasing uncertainties, especially on the energy side, we reckon these challenges will prevail and potentially even accelerate in the second half of the year.”
To mitigate risk, Evonik has established a set of measures to substitute natural gas at their main sites. At the Marl site, for example, full substitution of natural gas will become possible with a switch to LPG (Liquefied Petroleum Gas) and the continued operation of the coal-fired power plant. “We have implemented a bundle of strong measures at our European sites to secure our energy supply and support the EU and German energy savings targets,” said Kullmann.
“Based on our strong first half of the year and even assuming a gradual economic slowdown in the second half, we not only confirm our outlook for adjusted EBITDA – we even think that the upper end at €2.6 billion is well underpinned,” said Ute Wolf, Chief Financial Officer. “We will now put extra effort into the management of our net working capital. This should support free cash flow for the rest of the year and throughout the next.”
Free cash flow (FCF) in the first half year was -€106 million, below the strong prior-year figure. This can be attributed to a build-up of more than €900 million in net working capital due to increased raw material prices and higher inventory levels. Consequently, the outlook for the FCF conversion rate has been lowered from 40 percent to 30 percent.
Sales expectations are now between €17 billion and €18 billion for the full year. This raise from previous guidance range of €15.5 billion to €16.5 billion can mainly be attributed to an increase in prices to offset higher variable costs.