Evonik Industries AG

10 SEPTEMBER 21, 2010
GLOBAL CORPORATE FINANCE
and real estate divisions posted a decline in EBITDA of 19% and 16%, respectively, notwithstanding
that the real estate business benefited from a one-off gain on disposals in FY 2008.
For H1 2010, EI reported a 24% year-on-year increase in sales to €7.8 billion, supported by a sharp
improvement in the performance of the group’s chemicals business. The chemicals division posted a
34% increase in revenues, to €6.3 billion, driven by higher volumes (+25%) and prices (+7%).
Currency effects and changes in the scope of consolidation were more or less neutral (+1%
respectively), while the revenues of the energy and real estate businesses were flat to slightly down (-1%
and -3%, respectively). EBITDA was sharply up (+83% to €1.5 billion), again mainly supported by
the chemicals business (+91% to €1.2 billion).
FIGURE 9
Revenues and profitability [1]
€ MILLION 2009 2008 2007
Turnover 13,076 15,873 14,444
Operating Profit 791 898 994
Operating Profit Margin 6.0% 5.7% 6.9%
EBITDA [2] 1,814 1,893 2,083
EBITDA Margin [2] 13.9% 11.9% 14.4%
EBITA/ Average Assets excl. cash [2] 5.4% 5.6% 6.6%
[1] These figures are based on standard adjustments that Moody’s makes to enable global consistency for issuers reporting under IFRS. For details on
these adjustments, please refer to our rating methodology document “Moody’s Approach to Global Standard Adjustments in the Analysis of Financial
Statements of Non-Financial Corporations – Part II”, published in February 2006.
[2] EBITDA/EBITA computed as defined in Moody’s Global Chemical Industry Rating Methodology, published in February 2006.
... and the management’s efforts to improve the group’s cost structure and cash flow generation
EI rapidly adjusted to deteriorating market conditions at the end of FY 2008, as evidenced by the costcutting
initiatives that the group launched to protects its earnings. The measures implemented were
mainly centred on shortened working hours, reduced variable salary payments, reduction in external
services and on the streamlining of administrative functions. EI achieved costs savings of more than
€500 million during the course of 2009, of which more than one quarter was of a sustainable nature
and will be retained. In addition to temporary measures to adjust to depressed market conditions EI
has also launched a cost optimisation programme, “On Track” which aims to achieve annual
sustainable cost savings of €500 million per annum by 2012. As referred to in the “Management
Strategy” section, this programme will be focused on the entire value chain, with savings targeted in
operations, corporate centre, administration, shared services, insurance and sourcing. The group’s
various restructuring and cost-cutting measures led to a P&L charge of €103 million in 2009.
Besides implementing short-term and sustainable cost-savings measures, EI has been focusing on
protecting its cash flows through the increased control of working capital and capital expenditures
(capex). EI managed to reduce its net working capital from €3.2 billion in December 2008 to around
€2.3 billion in December 2009, and reduced its NWC/sales ratio, respectively the days of net working
capital, significantly. The group has also reduced capex by 33%, to €834 million.
In 2009, EI exhibited mixed results with regard to cash flow generation. EI’s funds from operations
(FFO) and retained cash flow (RCF) were under pressure due to the group’s weaker operating
performance, falling by 18% to €1.1 billion and by 21% to €760 million, respectively. The group’s
ANALYSIS: EVONIK INDUSTRIES AG