Evonik Leading Beyond Chemistry - Q3 2020 Earnings Conference Call 3 November 2020 - Evonik Industries
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Evonik
Leading Beyond Chemistry
Q3 2020
Earnings Conference Call
3 November 2020
Christian Kullmann, Chief Executive Officer
Ute Wolf, Chief Financial Officer
1
Table of contents 1. Strategic highlights 2. Financial highlights 3. Outlook FY 2020 2 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Consistent strategy execution
Transformation towards more balanced portfolio with higher returns well on track
Value-generating New divisional Carve-Out Asset Optimization
acquisitions structure Baby Care in Animal Nutrition
Strengthening our Growth divisions with Focus on specialty Closing smallest
resilient businesses strong positioning and businesses with Methionine plant in
at attractive valuations promising growth drivers high margins & returns Wesseling, Germany
▪ Specialty applications
▪ Clear strategic roles ▪ Set up Baby Care as ▪ Focus on three
in hydrogen peroxide
▪ Higher transparency independent unit by world-scale,
▪ Accelerating growth of mid-2021 best-in-class hubs
catalysts business ▪ More efficient internal
management ▪ Evaluating strategic ▪ Asset set-up for
▪ Both with options thereafter highest efficiency and
resilient performance ▪ Leaner organization optimized cost
during the crisis structures
3 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Innovation initiatives with clear sustainability focus
Sustainability integrated in innovation process as driver for future growth
Additive ▪ INFINAM® – next generation of specialized,
Manufacturing ready-to-use PA12 powders for 3D printing
▪ Improved recycling properties - 80% reusability
within printing process
▪ Based on natural sugar and 100% biodegradable with
exceptional foaming properties
Biosurfactants
▪ Unilever accredits collaboration with Evonik as
key pillar of its “Clean Future” initiative
4 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Table of contents 1. Strategic highlights 2. Financial highlights 3. Outlook FY 2020 5 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Proven resilience
Portfolio delivering strength in challenging environment
Stable YTD EBITDA & pricing FCF YTD
in growth divisions above prior year level
EBITDA outlook confirmed
Clear sequential
FCF guidance increased
earnings recovery in Q3
during the crisis
6 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Resilient first nine month despite corona crisis
Robust performance driven by growth divisions
Adjusted EBITDA 9M 2020 (yoy) ▪ Resilient business model with
Specialty mission-critical solutions for customers
Additives
▪ Stable margin and pricing
-1% -10% -17%
Nutrition ▪ Defensive end market exposure,
& pricing support & active cost mgmt.
Care ▪ yoy higher earnings
▪ Ongoing resilience in Inorganics like
Smart H202, Consumer Silica or Catalysts
Growth Evonik Peer Materials ▪ Clear recovery in automotive-related
Divisions1 Group Average2 businesses
1. Defined as Growth divisions + Services, Corporate & Other
2. Peers: Akzo, Arkema, Ashland, BASF, Clariant, Covestro, DSM, Fuchs, Lanxess, Solvay, WR Grace; 9M reported where available, otherwise H1 + Q3 consensus
7 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Table of contents 1. Strategic highlights 2. Financial highlights 3. Outlook FY 2020 8 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Outlook FY 2020 (1/2)
Adjusted EBITDA outlook narrowed to €1.8 - 2.0 bn
Adj EBITDA outlook FY 2020 (FY 2019: €2,153 m)
€2.1 bn
€2.0 bn ▪ “Promise & Deliver”
continued despite Corona
€1.8 bn pandemic
€1.7 bn ▪ Specific outlook provided
already in May
▪ Confirmed with Q2 reporting
Outlookoutlook
2020E Outlook 2020E 2020E
Early …confirmed …narrowed ▪ Now narrowed to
as of May as of August new
with Q1… with Q2… with Q3
range of €1.8 - 2.0 bn
9 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Outlook FY 2020 (2/2)
FCF outlook upgraded once more
FCF ~€700 m & cash conversion rate1 >35% (FY 2019: €717 m / 33.3%)
in €m
▪ Strong track record in CCR improvement
900 >35% 40%
800
33% 35% ▪ High cash awareness and strict cost
30% management
700 24%
22% 717 25%
~700 ▪ CAPEX & NWC discipline
600 20%
15%
500 526
511 10% FCF outlook upgraded once more:
400
5%
300 0%
▪ FCF ~€700 m
2017 2 2018 2019 2020 ▪ Cash conversion rate1 of >35%
FCF CCR (previously: at least on prior year’s level)
1. Free cash flow conversion (FCF/adj. EBITDA) 2: Including Methacrylates business
10 3 November 2020 | Evonik Q3 2020 Earnings Conference Call11
Additional indications for 2020
▪ PeroxyChem: Included in outlook with 11 months (FY 2019: ~USD300 m sales, ~USD60 m adj. EBITDA)
▪ ROCE: Below the level of 2019 (2019: 8.6%)
▪ Capex1: Around the already low level of 2019 (2019: €880 m)
▪ EUR/USD: 1.14 EUR/USD (previous indication: 1.10 EUR/USD; 2019: 1.12 EUR/USD)
▪ EUR/USD sensitivity2: +/-1 USD cent = -/+ ~€7 m adj. EBITDA (FY basis)
▪ Adj. EBITDA Services, Corp. & Others: Slightly more negative than 2019 (2019: -€94 m)
(In the new divisional structure and starting with Q3 2020, Services, Corporate & Other will be reported and guided in
IR documents as only one line item going forward)
▪ Adj. D&A: Around the level of 2019 (2019: €952 m)
▪ Adj. net financial result: -€100 - 130 m (previous indication: around -€100 m; 2019: -€185 m)
Less negative in 2020 due to lower cross-currency swaps, lower interest rates for pensions and other provisions
▪ Adj. tax rate: Around 28% (previous indication: ~27%; 2019: 20%, related to MMA divestment)
1. Cash outflow for investment in intangible assets, pp&e | 2. Including transaction effects (after hedging) and translation effects; before secondary / market effects
12 3 November 2020 | Evonik Q3 2020 Earnings Conference CallQ3 2020 – Clear sequential earnings improvement
Sales Adj. EBITDA Free cash flow (9M) Adj. EPS
€2,917 m €519 m €521 m 0.40€
(Q3 19: €3,232 m) (margin: 17.8%) (9M 19: €417 m) (Q3 19: 0.42€)
Solid pricing in growth
divisions; sequential Clear sequential Better financial result
FCF above prior year;
volume improvement in improvement in while higher income
strict cash & cost discipline
Specialty Additives & earnings and margin taxes
Smart Materials
13 3 November 2020 | Evonik Q3 2020 Earnings Conference CallFree Cash Flow 9M 2020
Clearly higher FCF despite challenging environment
Free cash flow 9M 2020 (in € m, continuing operations)
in € m
+104 Free cash flow clearly higher in 9M (yoy):
521 ▪ Overcompensating EBIT decline of €154 m
417 ▪ High cash awareness with strict cost
management
▪ Disciplined capex management
▪ Ongoing benefit from CTA pension
reimbursement
9M 2019 9M 2020
▪ Lower tax & bonus payments
Excl. extraordinary carve-out taxes of ~€128 m in Q3 2019 (related to MMA divestment)
14 3 November 2020 | Evonik Q3 2020 Earnings Conference CallSpecialty Additives
Strong track record of sustained high margin level and stable prices
-10% ▪ Resilient performance based on leading portfolio of mission-
861 critical additive solutions
747 777
▪ Robust business model with strong track record of stable prices
and sustained high margin level
Sales ▪ Construction and renewable energy end markets continue to be
(in € m) robust, also benefitting from governmental stimulus programs
▪ Recovery in automotive, coatings and durable consumer goods
Q3 19 Q2 20 Q3 20
towards the end of the quarter
Volume Price FX Other
-6% +/-0% -4% +/-0%
Adj. -8%
EBITDA 232 214
202
(in € m)
/ margin
26.9 27.0 27.5
(in %)
Q3 19 Q2 20 Q3 20
16.8 14.6 22.6
15 3 November 2020 | Evonik Q3 2020 Earnings Conference CallNutrition & Care
Resilient end markets and active cost management
-2% ▪ Yoy higher earnings and margin supported by resilient end
726 742 715
markets and active cost management
Animal ▪ Health & Care: Benefitting from defensive setup with continuously
345 384 330 -4% strong demand for active ingredients in cosmetic applications and
Nutrition
Sales pharma polymers as well as active cost management
Health &
(in € m) 381 358 385 +1% ▪ Animal Nutrition: Lower volumes after strong first half-year and
Care
(yoy) negative FX effects
Q3 19 Q2 20 Q3 20
Volume Price FX Other
-2% +8% -8% +/-0%
+18%
Adj.
EBITDA 168
140
119
(in € m)
/ margin
16.4 22.6 19.6
(in %)
Q3 19 Q2 20 Q3 20
16.8 14.6 15.8 22.6
16 3 November 2020 | Evonik Q3 2020 Earnings Conference CallSmart Materials
Continued resilience in Inorganics; improving trends in automotive
-5% ▪ Improving volume trend (Q3 20: -7% yoy vs. Q2 20: -20% yoy)
833 and ongoing resilient pricing
790
722
▪ Inorganics: Sales back to prior year level; continued resilience in
Inorganics 567 hygiene, personal care and environmental applications;
566 +/-0%
Sales 528 replacement-related automotive products (e.g. Silica for tires)
(in € m) Polymers showing clear recovery
266 193 224 -16%
▪ Polymers: After strong decline in Q2, OEM-related automotive
Q3 19 Q2 20 Q3 20 (yoy)
applications with improving trends. Membranes and 3D printing
Volume Price FX Other applications with ongoing strong development.
-7% -2% -4% +8%
Adj. -13%
EBITDA 157
137
(in € m) 102
/ margin
18.8 14.1 17.3
(in %)
Q3 19 Q2 20 Q3 20
16.8 14.6 15.8 22.6
17 3 November 2020 | Evonik Q3 2020 Earnings Conference CallPerformance Materials
Slow recovery from trough levels
-27% ▪ Difficult market environment for petrochemical derivatives
607 prevailing
437 444 ▪ Business slowly recovering from trough levels with higher
volumes and improving naphtha spreads in C4-chain
Sales ▪ Demand from auto sector for Butadiene and MTBE still weak but
(in € m) slowly recovering
▪ Baby Care with yoy lower volume and prices
Q3 19 Q2 20 Q3 20
Volume Price FX Other
-7% -20% +/-0% +/-0%
Adj. -43%
EBITDA 49
(in € m) 28
/ margin 12
8.1 2.7 6.3
(in %)
Q3 19 Q2 20 Q3 20
16.8 14.6 15.8 22.6
18 3 November 2020 | Evonik Q3 2020 Earnings Conference CallNet financial debt development Q3 2020
(in € m)
-84
2,994 2,910
+270 -42
-535
+223
30.06.2020 CF from Cash outflows Dividend (50%)1 Other 30.09.2020
Net financial debt operating for investments Net financial debt
activities in intangibles
(cont. op.) and PP&E
1. An amount of €0.57 per share has been paid during Q2 2020 as an advance on the net profit for fiscal year 2019. On September 3, 2020, the remaining €0.58 per share
were paid after Evonik’s annual shareholders’ meeting which took part on August 31, 2020
19 3 November 2020 | Evonik Q3 2020 Earnings Conference CallDevelopment of debt and leverage over time
(in € m)
6,840 6,639
7,184 ▪ Increase of net financial debt as per Q3 2020
6,108 (vs year-end 2019) mainly from closing of
2,910 PeroxyChem acquisition
3,023 2,907 2,141
2,741
2,251 ▪ Net financial debt leverage continues to be low at
1.3x
3,852 3,817 3,732 3,967 4,274
3,349
0.9x 1.3x 2.8x 2.5x 2.7x 3.5x ▪ More than half of net debt consists of long-dated
-1,098 -1,111 pension obligations with >17 years duration
2015 2016 2017 2018 20191 Q3 20201
▪ Slightly higher pension provisions in Q3 (vs Q2 at
Net financial debt Pension provisions Total leverage2 €3,994 m) upon decrease of pension discount
rates (German discount rate decline from 1.3% to
1.2%)
Adj. net debt3 2,251 2,741 6,590 6,389 5,8581 6,9341
Adj. EBITDA 2,465 2,165 2,357 2,601 2,1531 1,9931 ▪ Pension provisions partly balanced by
corresponding deferred tax assets of ~€1.43 bn
German pension 2.75 2.00 2.00 2.00 1.30 1.20
discount rate (%)
1. Continuing operations (excluding methacrylate activities) , Adj. EBITDA LTM | 2. Adj. net debt3 / adj. EBITDA | 3. Net financial debt – 50% hybrid bond + pension provisions
20 3 November 2020 | Evonik Q3 2020 Earnings Conference CallAdjusted income statement Q3 2020
in € m Q3 2019 Q3 2020 ∆ in % Depreciation & amortization:
Sales 3,232 2,917 -10 ▪ D&A in-line with full year guidance (“around the level of 2019 of
€952 m”)
Adj. EBITDA 543 519 -4
Adj. net financial result:
Depreciation & amortization -250 -250
▪ Positive effect from normalization in fair value of money market
Adj. EBIT 293 269 -8 funds (recorded in other financial result)
Adj. net financial result -63 -34 ▪ Last year: drop in interest rate level led to negative effects from
short-term securities and higher interest expenses for discounting
D&A on intangible assets 35 38 long-term provisions
Adj. income before income taxes 265 273 3 Adj. tax rate:
Adj. income tax -65 -84 ▪ Q3 2020 with tax rate of 30.8%; 1-9 2020 (27.5%) in-line with FY
guidance of around 28%
Adj. income after taxes 200 189 -6
Adjustments:
Adj. non-controlling interests -5 -3
▪ Restructuring (-€25 m): mainly related to asset optimization in
Adj. net income 195 186 -5 Animal Nutrition and efficiency programs
Adj. earnings per share 0.42 0.40 -5 ▪ Impairment (-€2 m): last year with higher number for coal power
plant in Marl (Germany), which is replaced by natural gas power
Adjustments -74 -24 plant in 2022
21 3 November 2020 | Evonik Q3 2020 Earnings Conference CallCash flow statement Q3 2020
in € m Q3 2019 Q3 2020 CF from operating activities
Income before financial result and income taxes (EBIT) 219 245 ▪ Last year with higher D&A for coal power plant in
Depreciation and amortization 286 254 Marl (Germany), which is replaced by natural gas
∆ Net working capital 3 -38 power plant in 2022
Change in provisions for pensions & other post-employment ▪ Change in provision for pensions mirrors ongoing
-34 1 benefit from CTA reimbursement
benefits
Change in other provisions 46 41
Change in miscellaneous assets/liabilities 6 39
Cash outflows from income taxes* 0 12
Others 5 -19
Cash flow from operating activities (continuing ops.)* 531 535
CF from investing & financing activities
Cash outflows for investment in intangible assets, pp&e -210 -223 ▪ Last year cash inflow from divestment of
FCF* 321 312 Methacrylates business in investing activities
▪ Cash flow from financing activities lower due to
Cash flow from investing activities (continuing ops.) 773 38 ~€270 m dividend payment in Q3 (50%, ~€270 m
already paid in Q2)
Cash flow from financing activities (continuing ops.) -219 -384
* Excl. extraordinary carve-out taxes of ~€128 m in Q3 2019 (related to MMA divestment)
22 3 November 2020 | Evonik Q3 2020 Earnings Conference CallDivisional overview by quarter Sales (in € m) Q1/19 Q2/19 Q3/19 Q4/19 FY 2019 Q1/20 Q2/20 Q3/20 Specialty Additives 842 867 861 810 3,381 852 747 777 Nutrition & Care 731 719 726 747 2,922 748 742 715 Smart Materials 857 845 833 836 3,371 858 722 790 Performance Materials 677 698 607 652 2,634 584 437 444 Services, Corporate & Others 180 177 205 239 800 201 179 191 Evonik Group 3,287 3,306 3,232 3,284 13,108 3,243 2,827 2,917 Adj. EBITDA (in € m) Q1/19 Q2/19 Q3/19 Q4/19 FY 2019 Q1/20 Q2/20 Q3/20 Specialty Additives 225 226 232 203 886 239 202 214 Nutrition & Care 113 121 119 109 462 118 168 140 Smart Materials 162 164 157 168 651 166 102 137 Performance Materials 63 84 49 53 248 18 12 28 Services, Corporate & Others -24 -29 -14 -27 -94 -28 -28 0 Evonik Group 539 566 543 505 2,153 513 456 519 23 3 November 2020 | Evonik Q3 2020 Earnings Conference Call
Upcoming IR events
Conferences & Roadshows Upcoming Events & Reporting Dates
4 November 2020 Roadshow, Frankfurt (virtual) 3 November 2020 Q3 2020 reporting
4 November 2020 Roadshow, global (virtual)
4 March 2021 Q4/FY 2020 reporting
10 November 2020 UBS European Conference, London (virtual)
6 May 2021 Q1 2021 reporting
Morgan Stanley Chemicals Conference, Boston
10/11 November 2020
(virtual)
2 June 2021 AGM
12 November 2020 Baird's Global Industrial Conference, Chicago (virtual)
5 August 2021 Q2 2021 reporting
Société Générale European ESG/SRI Conference,
17 November 2020
Paris (virtual)
4 November 2021 Q3 2021 reporting
24 November 2020 Credit Suisse Year End Conference, London (virtual)
30 November 2020 Berenberg European Conference, London (virtual)
Bank of America Chemicals Conference, London
1 December 2020
(virtual)
Societe Generale "The Premium Review" Conference,
2 December 2020
Paris (virtual)
24 3 November 2020 | Evonik Q3 2020 Earnings Conference CallEvonik Investor Relations team
Tim Lange Janine Göttel
Head of Investor Relations Team Assistant
+49 201 177 3150 +49 201 177 3146
tim.lange@evonik.com janine.goettel@evonik.com
Ina Gährken Kai Kirchhoff
Investor Relations Manager Investor Relations Manager
+49 201 177 3142 +49 201 177 3145
ina.gaehrken@evonik.com kai.kirchhoff@evonik.com
Cédric Schupp
Investor Relations Manager
+49 201 177 3149
cedric.schupp@evonik.com
25 3 November 2020 | Evonik Q3 2020 Earnings Conference CallDisclaimer
In so far as forecasts or expectations are expressed in this presentation or where our statements concern the
future, these forecasts, expectations or statements may involve known or unknown risks and uncertainties.
Actual results or developments may vary, depending on changes in the operating environment. Neither
Evonik Industries AG nor its group companies assume an obligation to update the forecasts, expectations or
statements contained in this release.
26 3 November 2020 | Evonik Q3 2020 Earnings Conference Call27
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