Evonik expects a subdued market environment and a decline in 2016 earnings

By Jane Byrne

- Last updated on GMT

© istock.com/archix
© istock.com/archix

Related tags Amino acid Supply and demand Essential amino acid Evonik

The German group, in releasing its financial results for Q4 and the full year 2015 yesterday, predicted adjusted earnings for this year could dip by as much as 19%. 

In a conference call on the results, Klaus Engel, CEO of Evonik, cited uncertainty about economic growth in China and Brazil. “Growth rates in the US are being questioned more and more,”​ he added.

He also cited the ongoing risk from geopolitical tensions which may intensify further in the coming months.

The CEO said the expectation was that adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for Evonik in 2016 would be in and around the €2bn to €2.2bn mark, down from €2.47bn in 2015.

The chemical group predicted lower sales prices for its animal nutrition business, personal care and performance materials division. Evonik also forecasted a further reduction in oil and, hence, a knock-on effect on raw materials prices.

Its shares fell sharply yesterday on the guidance.

Methionine volumes

In terms of methionine, the group forecasted a “gradual normalization”​ of the “extraordinarily”​ tight supply and demand situation experienced in 2015. “Methionine had an outstanding year with volumes and prices in 2015. That trend is unlikely to continue in 2016,”​ said Ute Wolf, chief financial officer of Evonik on the call.

The company said the situation in the well-supplied lysine market remains challenging but it expects overall animal nutrition market demand to remain robust.

The German firm also announced yesterday that it has received the go ahead from its internal committees for an additional methionine production facility on Jurong Island in Singapore. Evonik had previously flagged up its intentions in relation to this extra amino acid capacity last October.

That plant, with projected annual production capacity of 150,000 metric tons, is set to come on stream in 2019. The new complex will be adjacent to the existing Evonik DL-methionine facility on Jurong Island, which only went live in 2014.

Both facilities will serve the entire Asian market.

Evonik also reported on capacity developments in relation to amino acid requirements outside of the poultry and pig sector, saying the production plant for its Mepron feed additive for dairy cows has been built in Alabama in the US.

And construction continues on the manufacturing facility for Evonik’s AQUAVI Met-Met additive for shrimp in Antwerp in Belgium.

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