Evonik Industries announces job reductions to streamline operations and lower expenses, navigating a challenging market landscape with a focus on cost management and strategic positioning. Analysts weigh in on future outlook.
Evonik Industries has announced plans to reduce its workforce by approximately 6% following disappointing fourth-quarter results, joining a growing number of chemicals companies taking steps to control costs in a challenging market environment.
The German chemicals company revealed its intention to eliminate up to 2,000 positions by 2026 as part of efforts to streamline operations and lower expenses while adapting to a prolonged period of economic uncertainty. The restructuring is projected to generate cost savings of around 400 million euros ($433.6 million) annually by the end of 2026, targeting a significant portion of management roles.
Evonik's workforce downsizing aligns with similar moves by other industry players grappling with subdued demand and persistent high energy costs. Last year saw multiple chemical companies, including Evonik, issue profit warnings in response to ongoing market challenges.
With shares holding relatively steady following the announcement, Evonik is navigating a landscape of intense competition and economic volatility. The approach taken by companies like BASF, Celanese, and Covestro underscore the broader industry trend towards rationalizing operations and fortifying financial resilience amid global uncertainties.
In acknowledging the impact of worldwide crises on performance, Evonik CEO Christian Kullmann affirmed the company's commitment to prudent cost management and strategic product positioning to navigate the prevailing market headwinds.
In the fourth quarter, Evonik reported a net loss of EUR146 million, a decrease from EUR284 million in the same period the previous year. Sales saw a 17% decline, amounting to EUR3.60 billion. The company attributed these results to higher financial expenses and taxes.
Adjusted earnings before interest, taxes, depreciation, and amortization also dropped by 24%, reaching EUR312 million.
Analysts had anticipated a fourth-quarter net profit of EUR7.0 million for Evonik, along with an adjusted Ebitda of EUR324.6 million and sales totaling EUR3.81 billion. These figures were based on consensus estimates provided by Vara Research.
CEO Kullmann stated, "What we are currently experiencing are not cyclical fluctuations, but massive, consequential changes of our economic environment." Looking ahead to 2024, Evonik foresees an adjusted Ebitda in the range of EUR1.7 billion to EUR2.0 billion, differing from the consensus estimate of EUR1.87 billion. Sales projections for the year fall between EUR15 billion and EUR17 billion, contrasting with the consensus view of EUR15.89 billion.
In a strategic move, Evonik announced the sale of its superabsorbents business to International Chemical Investors Group for an undisclosed sum in the low triple-digit million euro range. This transaction represents the company's second step in the divestment of its performance-materials division.
The acquisition by ICIG includes five production facilities located in Germany and the U.S., with the deal expected to close by mid-2024. The business, known for its powdered polymers used in absorbent materials for hygiene products, achieved sales of EUR892 million in 2023.
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