Evonik net income tripled in 2010; silica capacity expansion underway

At Evonik Industries AG’s financial press conference on March 16, Executive Board chairman Klaus Engel stated 2010 was an “outstanding” year for the chemicals business and reiterated the company’s intention to increase its precipitated silica capacity in Asia and Europe 25 per cent by 2014. “Evonik is more profitable than ever before,” commented Engel as 2010 group sales of 13.3 billion euros were announced – a year-on-year increase of 26 per cent. Evonik notes that a “considerable upturn” in business in the second half of 2009 was followed by “momentum throughout 2010, driven principally by higher demand from Asia and Europe.”

The company reports that strong demand, high capacity utilisation and improved margins led to EBIDTA increasing 47 per cent to 2,365 million euros, while the group’s EBITDA margin improved from 15.3 per cent to 17.8 per cent. In the Chemicals Business Area in particular, the EBITDA margin grew from 16.1 per cent in 2009 to 18.3 per cent last year. Earnings before interest, taxes and the non-operating result (EBIT) increased 89 per cent to 1,639 million euros.

The company’s non-operating loss of 236 million euros mainly comprised expenses for restructuring, impairment losses, pensions and environmental protection. Income before income taxes from the continuing operations rose from 189 million euros in 2009 to 975 million euros. Income before income taxes from the discontinued operations came to 73 million euros, a figure that mainly includes operating earnings from the Energy Business Area and one-off expenses connected with the divestment of this business. The previous year’s figure of 223 million euros mainly contained earnings from the Energy Business Area’s operations. Overall, Evonik almost tripled net income to 734 million euros in 2010.

Plans to increase capacity of precipitated silicas – a crucial component in low rolling-resistance tyres – by a quarter were first announced in October 2010, a move Klaus Engel said would secure supply of the material for its global customers. Evonik disclosed that a “mid double-digit million euro” investment would be made in a “six-digit metric ton” capacity expansion. The company currently produces precipitated silica at ten sites in eight countries; the current expansion project is being implemented in addition to a May 2010 announced decision for its Insilco Ltd. subsidiary to support growing Indian tyre industry demand for precipitated silica by increasing capacity at its Gajraula plant, with the additional capacity available by the first half of 2011.

“Evonik is the market leader in precipitated silicas,” commented Thomas Hermann, head of Inorganic Materials, the business unit covering silicas and other specialty chemicals. “The market is expected to grow substantially over the next few years. Through our capacity expansion, we plan to satisfy the increasing demand and to achieve further growth along with the market.”