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After a very successful year in 2021, Evonik expects further growth in 2022. "We achieved really strong earnings and have consistently implemented our strategy," said Christian Kullmann, Chairman of the board of management. "We are now gearing the company towards future growth. Evonik is becoming more sustainable, more profitable and more diverse."
Sales, adjusted EBITDA and free cash flow all increased more than 20% in 2021 compared with the previous year. Sales rose 23% to €15bn on the back of continued strong demand in all the chemical divisions.
Adjusted earnings before interest, taxes, depreciation and amortisation (adjusted EBITDA) were €2.38bn, up 25% from the previous year. Significantly higher raw material, energy, and logistics costs were successfully offset. Adjusted net income rose 54% to €986M with adjusted earnings per share gaining from €1.37 to €2.12.
Free cash flow increased 22% to €950M, which corresponds to a cash conversion rate of 40%. "We are successfully maintaining our high cash conversion rate," said Ute Wolf, Chief Financial Officer. "We expect free cash flow to grow for the fifth year in a row."
Evonik is confident about 2022. Following a successful start, the company expects adjusted EBITDA to grow by at least 10% in the first quarter compared to the prior-year quarter.
For the full year, Evonik expects sales to increase to between €15.5bn and €16.5bn. Adjusted EBITDA is expected to increase to between €2.5bn and €2.6bn. The cash conversion rate is again forecast at around 40%.
At the annual shareholders’ meeting on May 25, 2022, the executive and supervisory boards will be proposing to increase the annual dividend slightly to €1.17 per share. That corresponds to a dividend yield of about 4%.
Portfolio, Innovation
An important driver of the positive business development is Evonik’s strength in innovation. In 2021, the company generated sales of more than €500M with new products from its six innovation growth fields, up from about €350M in the previous year. Cosmetic active ingredients and drug delivery technologies recorded particularly strong growth.
"We are well on our way to achieving our goal of generating more than €1bn in sales by 2025 with innovative products," said Harald Schwager, the executive board member responsible for innovation. "These products are characterised by great growth potential and above-average margins."
A central driver of innovation is sustainability. This includes the goal of steadily increasing Evonik’s sales of sustainable products. The share of sales from Next Generation Solutions recently rose by two percentage points to 37%. Next Generation Solutions are products that offer customers a clearly higher sustainability benefit compared to competing products. For example, Evonik is currently building the first industrial-scale production plant for bio-based and fully biodegradable surfactants in Slovakia.
Evonik is pressing ahead with the restructuring of its portfolio. In October 2021, for example, the company acquired the Swiss plant extract manufacturer Botanica. This strengthens Evonik’s position in the market for cosmetic active ingredients. At the same time, the spin-off of the Baby Care business unit was completed in preparation for its sale.
True leadership
Evonik is initiating change in numerous management positions. Up-and-coming executives are increasingly taking on more responsibility. The proportion of women in management is rising, as is the number of managers with an international background. "The decisive factor for our success is our employees," said Kullmann. "With their expertise, creativity, and motivation, they make life a little better every day, all over the world. This diversity makes us strong and it is now increasingly reflected in the company’s management positions. In short, it’s the mix that counts."
This change is particularly evident at the management level below the executive board. Three of Evonik’s five divisions will be headed by women, including one from the US and one from France.
In addition, Evonik is strengthening its presence in Asia in terms of personnel to reflect the growing importance of the region. For the first time, a member of the extended executive board will relocate from Essen, Germany, to Asia. Claus Rettig, currently Head of the Smart Materials division, will lead the entire Asian business locally with a strengthened management team and general power of attorney. "If you want to participate in the growth of the Asian markets, you can’t merely supply these markets," said Kullmann. "You have to be present on the ground with modern production, research and development, and a strong management team."
The new Head of the Smart Materials division will be Lauren Kjeldsen, who previously led the Specialty Additives division. She will be succeeded by Claudine Mollenkopf. Joachim Dahm will become the new Head of the Technology & Infrastructure division. Maike Schuh will become the new Head of the Performance Materials division.
Development of the chemical divisions
Specialty Additives: The division’s sales rose 15% to €3.71bn in 2021. Products for the construction and coating industries as well as for renewable energies achieved significant sales growth in all regions after a noticeable increase in demand. Additives for polyurethane foams for durable goods such as mattresses and refrigerators also recorded a good volume development and achieved significantly higher sales. In the second half of the year, the increase in sales was partly limited by disruptions in global supply chains and the associated lack of availability of some raw materials. Adjusted EBITDA increased 7% to €920M.
Nutrition & Care: Sales at Nutrition & Care rose 19% to €3.56bn in 2021. Essential amino acids continued to be in high demand worldwide and achieved significantly higher sales with improved selling prices. At Health Care, pharmaceutical applications saw a significant increase in sales, especially lipids for mRNA vaccines. This was made possible by additional production capacities built up in the first months of the year. Care Solutions products, and in particular active ingredients for cosmetic applications, once again increased sales. Adjusted EBITDA rose 28% to €717M, mainly thanks to improved selling prices.
Smart Materials: The division’s sales climbed 21% to €3.92bn. Sales of polymers grew significantly. In particular, high-performance polymers recorded a significant increase in demand from the automotive industry. But demand was also strong for polyamide-12 powders for 3D printing and membranes for efficient gas processing. Sales of inorganic products also increased significantly. The tire silica business benefited from high demand worldwide, and active oxygen products were able to increase volumes in both the specialty business and the classic hydrogen peroxide business. Adjusted EBITDA rose 23% to €650M.
Performance Materials: The division’s sales improved 47% to €2.91bn in 2021. Sales of C4 derivatives rose significantly on increased demand and much improved selling prices. The alcoholates business saw high demand and achieved significantly higher sales. Business development at the superabsorbent business continued to be adversely affected by the difficult market environment. Adjusted EBITDA improved from €88M to €317M mainly because of higher selling prices.
