Quarterly Report • May 7, 2019
Quarterly Report
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1st Quarter 2019
| 1st quarter | ||
|---|---|---|
| in € million | 2019 | 2018 |
| Sales | 3,287 | 3,247 |
| Adjusted EBITDAb | 539 | 554 |
| Adjusted EBITDA margin in % | 16.4 | 17.1 |
| Adjusted EBITc | 315 | 376 |
| Income before financial result and income taxes, continuing operations (EBIT) | 296 | 354 |
| Net income | 249 | 291 |
| Adjusted net income | 249 | 261 |
| Earnings per share in € | 0.53 | 0.62 |
| Adjusted earnings per share in € | 0.53 | 0.56 |
| Cash flow from operating activities, continuing operations | 334 | 224 |
| Cash outflows for investments in intangible assets, property, plant and equipmentd | -175 | -174 |
| Free cash flowe | 159 | 50 |
| Net financial debt as of March 31 | -3,419 | -2,984 |
| No. of employees as of March 31f | 35,947 | 36,343 |
Prior-year figures restated.
b Earnings before financial result, taxes, depreciation and amortization, after adjustments, continuing operations.
c Earnings before financial result and taxes, after adjustments, continuing operations.
f Including discontinued operations.
a The methacrylates business has been reclassified to discontinued operations.
d Investment in intangible assets, property, plant and equipment, continuing operations. e
Cash flow from operating activities less cash outflows for investment in intangible assets, property, plant and equipment.
Due to rounding, some figures in this report may not add up exactly to the totals stated.
1ST QUARTER
| Business conditions and performance | 4 |
|---|---|
| Business performance | 4 |
| Segment performance | 7 |
| Financial position | 12 |
| Expected development | 13 |
| Income statement | 15 |
| Balance sheet | 16 |
| Cash flow statement | 17 |
| Segment report | 18 |
| Appendix | 20 |
| Financial calendar | 23 |
| Credits | 23 |
a By location of customer.
As part of the consistent implementation of our corporate strategy, on March 4, 2019 we signed an agreement to sell the methacrylates business to Advent International Corporation, Boston (Massachusetts, USA) for €3 billion.1 The methacrylates business comprises large-volume monomers such as methylmethacrylate (MMA), various specialty monomers, and the PLEXIGLAS® brand of PMMA molding compounds and semi-finished products. The transaction is subject to the approval of the authorities in several countries and is expected to be closed in the third quarter of 2019. The methacrylates business has been reclassified to discontinued operations. The prior-year figures in the income statement and cash flow statement, and the key performance indicators used for management purposes have been restated accordingly. Most of the methacrylates business was allocated to the Performance Materials segment, and a small part was allocated to the Resource Efficiency segment.
Evonik made a solid start to the new year. Global demand remained good and selling prices were slightly higher overall. That had a positive effect on sales and adjusted EBITDA. The ongoing program to raise efficiency made further progress and supported earnings. However, performance was held back by start-up expenses for new production facilities that are being built to strengthen our global market position.
Prior-year figures restated.
The Evonik Group increased sales 1 percent to €3,287 million. The organic sales growth of 1 percent came from higher selling prices.
1 See Changes in the Evonik Group in the appendix.
| in % | 1st quarter 2019 |
|---|---|
| Volumes | – |
| Prices | 1 |
| Organic sales growth | 1 |
| Exchange rates | – |
| Change in the scope of consolidation/other effects | – |
| Total | 1 |
Prior-year figures restated.
Adjusted EBITDA declined 3 percent to €539 million. The adjusted EBITDA margin slipped from 17.1 percent in the prioryear quarter to 16.4 percent. As a result of initial application of IFRS 16 Leases2, with effect from January 1, 2019, depreciation includes depreciation of right-of-use assets. Adjusted EBIT dropped 16 percent to €315 million.
2 See Initial application of IFRS 16 in the appendix.
| 1st quarter | |||
|---|---|---|---|
| in € million | 2019 | 2018 | Change in % |
| Sales | 3,287 | 3,247 | 1 |
| Adjusted EBITDA | 539 | 554 | -3 |
| Adjusted depreciation, amortization, and impairment losses | -224 | -178 | |
| Adjusted EBIT | 315 | 376 | -16 |
| Adjustments | -19 | -22 | |
| thereof attributable to | |||
| Restructuring | -4 | -18 | |
| Impairment losses/reversals of impairment losses | -13 | 7 | |
| Acquisition/divestment of shareholdings | -4 | -5 | |
| Other | 2 | -6 | |
| Income before financial result and income taxes, continuing operations (EBIT) | 296 | 354 | -16 |
| Financial result | -54 | -47 | |
| Income before income taxes, continuing operations | 242 | 307 | -21 |
| Income taxes | -27 | -81 | |
| Income after taxes, continuing operations | 215 | 226 | -5 |
| Income after taxes, discontinued operations | 39 | 68 | |
| Income after taxes | 254 | 294 | -14 |
| thereof attributable to non-controlling interests | 5 | 3 | |
| Net income | 249 | 291 | -14 |
| Earnings per share in € | 0.53 | 0.62 | – |
Prior-year figures restated.
The adjustments of -€19 million mainly relate to impairment losses on an investment in the Nutrition & Care segment. The restructuring expenses were incurred for the SG&A 2020 program to reduce selling and administrative expenses and the Oleo 2020 project to raise the efficiency of oleochemicals in the Nutrition & Care segment. Further adjustments of -€4 million mainly comprise project expenses for the planned acquisition of the US company PeroxyChem, Philadelphia (Pennsylvania, USA). The prior-year adjustments principally related to restructuring expenses in connection with the closure of a production site in Hungary. The financial result was -€54 million, which was below the prior-year level due to higher interest expense for derivatives and initial application of IFRS 16. The adjusted financial result declined by €6 million to -€53 million. Income before income taxes, continuing operations, was 21 percent lower at €242 million. As a result of the remeasurement of deferred tax assets, the income tax rate on the continuing operations was 11 percent and the adjusted income tax rate was 14 percent. Income after taxes, discontinued operations, contains the methacrylates business and declined from €68 million to €39 million.
Overall, the net income of the Evonik Group decreased by 14 percent to €249 million.
Adjusted net income dropped 5 percent to €249 million in the first quarter of 2019. Adjusted earnings per share declined from €0.56 to €0.53.
| 1st quarter | ||||
|---|---|---|---|---|
| in € million | 2019 | 2018 | Change in % | |
| Adjusted EBITDA | 539 | 554 | -3 | |
| Adjusted depreciation, amortization, and impairment losses | -224 | -178 | ||
| Adjusted EBIT | 315 | 376 | -16 | |
| Adjusted financial result | -53 | -47 | ||
| Amortization and impairment losses on intangible assets | 32 | 32 | ||
| Adjusted income before income taxesa | 294 | 361 | -19 | |
| Adjusted income taxes | -40 | -97 | ||
| Adjusted income after taxesa | 254 | 264 | -4 | |
| thereof adjusted income attributable to non-controlling interests | 5 | 3 | ||
| Adjusted net incomea | 249 | 261 | -5 | |
| Adjusted earnings per share a in € | 0.53 | 0.56 | – |
Prior-year figures restated.
a Continuing operations.
| 1st quarter | |||
|---|---|---|---|
| in € million | 2019 | 2018 | Change in % |
| External sales | 1,149 | 1,119 | 3 |
| Adjusted EBITDA | 180 | 209 | -14 |
| Adjusted EBITDA margin in % | 15.7 | 18.7 | – |
| Adjusted EBIT | 103 | 148 | -30 |
| Capital expendituresa | 43 | 127 | -66 |
| No. of employees as of March 31 | 8,166 | 8,285 | -1 |
Prior-year figures restated.
a Capital expenditures for intangible assets, property, plant and equipment.
The Nutrition & Care segment grew sales 3 percent to €1,149 million in the first quarter of 2019. This was due to higher volumes, while selling prices declined.
Sales of essential amino acids for animal nutrition slipped slightly. This was caused by lower selling prices and negative currency effects, while volumes increased significantly. The business with specialties for industrial markets registered higher sales as a result of increased demand. The care solutions business also posted a pleasing development, benefiting from higher demand for specialty applications.
Adjusted EBITDA was €180 million, 14 percent lower than in the prior-year period, partly due to expenses in connection with the planned start-up of the new methionine facility in Singapore in mid-2019. The adjusted EBITDA margin fell significantly from 18.7 percent in the prior-year quarter to 15.7 percent.
| 1st quarter | |||
|---|---|---|---|
| in € million | 2019 | 2018 | Change in % |
| External sales | 1,399 | 1,364 | 3 |
| Adjusted EBITDA | 324 | 319 | 2 |
| Adjusted EBITDA margin in % | 23.2 | 23.4 | – |
| Adjusted EBIT | 248 | 251 | -1 |
| Capital expendituresa | 45 | 41 | 10 |
| No. of employees as of March 31 | 10,059 | 10,095 | – |
Prior-year figures restated.
a Capital expenditures for intangible assets, property, plant and equipment. The Resource Efficiency segment continued to develop successfully in the first quarter of 2019. Sales rose 3 percent to €1,399 million. Growth was driven principally by higher selling prices, whereas volumes were slightly lower than in the prior-year period.
Sales of high-performance polymers increased significantly. Since there was strong demand for polyamide 12 products and membranes, higher prices had a positive effect. Business with hydrogen peroxide benefited from a pleasing trend for conventional hydrogen peroxide applications and contributed higher sales. Sales of crosslinkers also increased due to high demand, especially for composite applications for the wind energy market, and for silica, which benefited from a pleasing trend in rubber and tire applications.
Despite start-up costs for the new silica plant in the USA, adjusted EBITDA improved 2 percent to €324 million. The adjusted EBITDA margin was a very good 23.2 percent (Q1 2018: 23.4 percent).
Prior-year figures restated.
| 1st quarter | |||
|---|---|---|---|
| in € million | 2019 | 2018 | Change in % |
| External sales | 559 | 601 | -7 |
| Adjusted EBITDA | 59 | 65 | -9 |
| Adjusted EBITDA margin in % | 10.6 | 10.8 | – |
| Adjusted EBIT | 34 | 50 | -32 |
| Capital expendituresa | 11 | 9 | 22 |
| No. of employees as of March 31 | 1,712 | 1,852 | -8 |
Prior-year figures restated.
a Capital expenditures for intangible assets, property, plant and equipment.
In the first quarter of 2019, sales fell 7 percent to €559 million in the Performance Materials segment, due to lower volumes, declining prices, and negative currency effects.
The development of performance intermediates was adversely affected by restricted supply of raw materials caused by a supplier's technical problems and the lower price of naphtha. Sales decreased significantly. By contrast, functional solutions posted higher sales, driven by increased demand, especially for alkoxides.
Adjusted EBITDA declined 9 percent to €59 million. The adjusted EBITDA margin fell slightly to 10.6 percent, down from 10.8 percent in the prior-year quarter.
Prior-year figures restated.
| 1st quarter | |||
|---|---|---|---|
| in € million | 2019 | 2018 | Change in % |
| External sales | 174 | 160 | 9 |
| Adjusted EBITDA | 31 | 35 | -11 |
| Adjusted EBITDA margin in % | 17.8 | 21.9 | – |
| Adjusted EBIT | -7 | 9 | -178 |
| Capital expendituresa | 22 | 16 | 38 |
| No. of employees as of March 31 | 12,071 | 12,138 | -1 |
Prior-year figures restated.
a Capital expenditures for intangible assets, property, plant and equipment.
In the first quarter of 2019, sales increased 9 percent to €174 million. This was mainly due to higher revenues from utility and waste management services for external customers at our sites. Adjusted EBITDA was 11 percent lower at €31 million.
Due to the improvement in the cash flow from operating activities, continuing operations, the free cash flow improved by €109 million to €159 million.
| 1st quarter | ||
|---|---|---|
| in € million | 2019 | 2018 |
| Cash flow from operating activities, continuing operations | 334 | 224 |
| Cash outflows for investments in intangible assets, property, plant and equipment | -175 | -174 |
| Free cash flow | 159 | 50 |
| Cash flow from other investing activities, continuing operations | -10 | -18 |
| Cash flow from financing activities, continuing operations | -71 | 50 |
| Cash flow from discontinued operations | 13 | 48 |
| Change in cash and cash equivalents | 91 | 130 |
Prior-year figures restated; for information on changes in the structure of the cash flow statement, please refer to the appendix.
The cash flow from operating activities, continuing operations, increased by €110 million to €334 million. This was due to a lower rise in net working capital, reimbursement of pension payments by the CTA3, and initial application of IFRS 16.
The cash flow from other investing activities, continuing operations, comprised an outflow of €10 million. The cash outflow for financing activities, continuing operations, decreased to €71 million, mainly due to lower borrowing. The cash flows from discontinued operations related to the methacrylates business and amounted to €13 million.
Net financial debt was reduced by €154 million compared with January 1, 2019 to €3,419 million thanks to the good free cash flow.
| in € million | Mar. 31, 2019 | Jan. 1, 2019a | Dec. 31, 2018 |
|---|---|---|---|
| Non-current financial liabilitiesb | -4,180 | -4,228 | -3,683 |
| Current financial liabilitiesb | -343 | -351 | -230 |
| Financial debt | -4,523 | -4,579 | -3,913 |
| Cash and cash equivalents | 1,079 | 988 | 988 |
| Current securities | 8 | 8 | 8 |
| Other financial investments | 17 | 10 | 10 |
| Financial assets | 1,104 | 1,006 | 1,006 |
| Net financial debt | -3,419 | -3,573 | -2,907 |
| Net financial debt, discontinued operations | -18 | – | – |
| Net financial debt including discontinued operations | -3,437 | -3,573 | -2,907 |
a Adjustment due to initial application of IFRS 16 as of January 1, 2019: addition of lease liabilities totaling €666 million.
b Excluding derivatives, excluding the refund liability for rebate and bonus agreements, and excluding liabilities from exchange-type transactions with competitors.
3 Contractual trust arrangement.
In the first three months of 2019, capital expenditures were €124 million, significantly below the prior-year level of €195 million.4 It should be noted here that the prior-year figure contained high investment for the methionine facility in Singapore and that no notable capital expenditures have yet been incurred for the next major project, the construction of a polyamide 12 plant in Marl (Germany).
We still expect global economic conditions in 2019 to be weaker than in 2018. As a result of the industrial recession in China, the euro zone and Japan, the increasing slowdown in growth in Europe, and the continued dampening effect of the protectionist measures taken by the US government, we have reduced our expectation for global growth from 2.9 percent to 2.7 percent compared with 2018 (3.2 percent).
Our forecast is based on the following assumptions:
Following signature on March 4, 2019 of the agreement to sell the methacrylates business, we have adjusted our outlook compared with the start of this year. The outlook now refers to Evonik's continuing operations and no longer includes the methacrylates business, which has been reclassified to discontinued operations. The earnings from the planned acquisition of the US company PeroxyChem are not yet included.
Although the economic situation remains challenging, we anticipate that sales will be at least stable in 2019 (20185: €13.3 billion). We also expect adjusted EBITDA to be at least stable (20185: €2.150 billion).
We assume a continuation of the volume growth and positive earnings trend in the majority of businesses in the Nutrition & Care segment. With new production capacities coming on stream, we expect the annual average prices for essential amino acids for animal nutrition to be lower than in the previous year. To offset the impact on our earnings, in 2018 we embarked on a program to raise the efficiency of our animal nutrition business. In addition, earnings will be adversely affected by expenses for the start-up of our new methionine facility in Singapore, which is planned for mid-2019. Overall, earnings in the Nutrition & Care segment are expected to be slightly lower than in the previous year (2018: €810 million).
In 2019, the Resource Efficiency segment will continue to benefit from its good positioning in the respective markets and from the trend to resource-efficient solutions. Although growth is expected to slow in some end-markets and regions, we expect earnings to be slightly higher than in the previous year (20185: €1,258 million).
In the Performance Materials segment (without the methacrylates business), we assume that earnings will be fairly stable (20185: €265 million). Operationally, we anticipate a slight downward trend in the C4 chain, but we do not expect a recurrence of the downside impact of the low water level in the river Rhine.
4 In principle, there is a slight timing difference in outflows for property, plant and equipment.
5 Continuing operations.
The earnings impact of the anticipated slight reduction in raw material prices may affect the various businesses differently, but should balance out across the portfolio as a whole.
In 2019, the return on capital employed (ROCE) should remain above the cost of capital (10.0 percent before taxes). However, it will be held back by an increase in capital employed as a result of the initial application of IFRS 16.
We expect capital expenditures to be below the prior-year level at about €950 million in 2019 (20186: €969 million). The budget for maintenance and growth investments is around €800 million. As a temporary effect, there will be additional cash expenditure for the construction of a fully backwardly integrated polyamide 12 plant in Marl (Germany).
We expect the free cash flow to improve significantly year-on-year in 2019 (20186: €526 million). Positive effects will come from the first reimbursement of pension payments by the CTA, which will bring a substantial and lasting improvement in the free cash flow, and from lower cash outflows from net working capital than in 2018. Negative factors will be a normalization of tax payments, cash outflows for the SG&A 2020 efficiency enhancement program, and higher bonus payments as a result of the successful business performance in 2018.
| Previous forecast incl. methacrylates business |
New forecast excl. methacrylates business |
|||
|---|---|---|---|---|
| Forecast performance | 2018 | Forecast for 2019 | ||
| indicators | 2018a | Forecast for 2019a | continuing operations | continuing operations |
| Group sales | €15.0 billion | Slightly lower to stable | €13.3 billion | At least stable |
| Adjusted EBITDA | €2.60 billion | Slightly lower to stable | €2.15 billion | At least stable |
| Above the cost of capital, | Above the cost of capital, | |||
| ROCE | 12.1% | slightly lower than in the prior year | 10.2% | around the prior-year level |
| Capital expenditures | €1.05 billion | Around €1.0 billion | €969 million | Around €950 million |
| Significantly higher than | Significantly higher than in | |||
| Free cash flow | €672 million | the prior year | €526 million | the prior year |
a As reported in the financial report 2018.
| 1st quarter | ||
|---|---|---|
| in € million | 2019 | 2018 |
| Sales | 3,287 | 3,247 |
| Cost of sales | -2,312 | -2,232 |
| Gross profit on sales | 975 | 1,015 |
| Selling expenses | -380 | -374 |
| Research and development expenses | -107 | -101 |
| General administrative expenses | -148 | -153 |
| Other operating income | 55 | 60 |
| Other operating expense | -89 | -95 |
| Result from investments recognized at equity | -10 | 2 |
| Income before financial result and income taxes, continuing operations | 296 | 354 |
| Interest income | 6 | 5 |
| Interest expense | -55 | -52 |
| Other financial income/expense | -5 | – |
| Financial result | -54 | -47 |
| Income before income taxes, continuing operations | 242 | 307 |
| Income taxes | -27 | -81 |
| Income after taxes, continuing operations | 215 | 226 |
| Income after taxes, discontinued operations | 39 | 68 |
| Income after taxes | 254 | 294 |
| thereof attributable to | ||
| Non-controlling interests | 5 | 3 |
| Shareholders of Evonik Industries AG (net income) | 249 | 291 |
| Earnings per share in € (basic and diluted) | 0.53 | 0.62 |
Prior-year figures restated.
| in € million | Mar. 31, 2019 | Dec. 31, 2018 |
|---|---|---|
| Intangible assets | 5,909 | 6,134 |
| Property, plant and equipment | 6,309 | 6,785 |
| Right-of-use assets | 608 | – |
| Investments recognized at equity | 37 | 46 |
| Other financial assets | 225 | 233 |
| Deferred taxes | 1,340 | 1,419 |
| Other income tax assets | 15 | 16 |
| Other assets | 49 | 56 |
| Non-current assets | 14,492 | 14,689 |
| Inventories | 2,096 | 2,304 |
| Trade accounts receivable | 1,716 | 1,686 |
| Other financial assets | 114 | 140 |
| Other income tax assets | 182 | 180 |
| Other assets | 290 | 295 |
| Cash and cash equivalents | 1,079 | 988 |
| 5,477 | 5,593 | |
| Assets held for sale | 1,554 | – |
| Current assets | 7,031 | 5,593 |
| Total assets | 21,523 | 20,282 |
| Issued capital | 466 | 466 |
|---|---|---|
| Capital reserve | 1,171 | 1,167 |
| Retained earnings including distributable profit | 6,286 | 6,237 |
| Treasury shares | -11 | – |
| Other equity components | -19 | -141 |
| Equity attributable to shareholders of Evonik Industries AG | 7,893 | 7,729 |
| Equity attributable to non-controlling interests | 97 | 96 |
| Equity | 7,990 | 7,825 |
| Provisions for pensions and other post-employment benefits | 3,447 | 3,732 |
| Other provisions | 815 | 855 |
| Other financial liabilities | 4,187 | 3,689 |
| Deferred taxes | 494 | 557 |
| Other income tax liabilities | 246 | 223 |
| Other payables | 73 | 47 |
| Non-current liabilities | 9,262 | 9,103 |
| Other provisions | 1,042 | 1,047 |
| Trade accounts payable | 1,336 | 1,493 |
| Other financial liabilities | 525 | 395 |
| Other income tax liabilities | 62 | 64 |
| Other payables | 382 | 355 |
| 3,347 | 3,354 | |
| Liabilities associated with assets held for sale | 924 | – |
| Current liabilities | 4,271 | 3,354 |
| Total equity and liabilities | 21,523 | 20,282 |
| 1st quarter | ||
|---|---|---|
| in € million | 2019 | 2018 |
| Income before financial result and income taxes, continuing operations | 296 | 354 |
| Depreciation, amortization, impairment losses/reversal of impairment losses on non-current assets | 221 | 181 |
| Result from investments recognized at equity | 10 | -2 |
| Gains/losses on the disposal of non-current assets | -5 | -2 |
| Change in inventories | -65 | -118 |
| Change in trade accounts receivable | -166 | -67 |
| Change in trade accounts payable | 27 | -66 |
| Change in provisions for pensions and other post-employment benefits | -23 | -68 |
| Change in other provisions | 24 | 26 |
| Change in miscellaneous assets/liabilities | 80 | 37 |
| Cash inflows from dividends | 2 | 2 |
| Cash inflows/outflows for income taxes | -67 | -53 |
| Cash flow from operating activities, continuing operations | 334 | 224 |
| Cash flow from operating activities, discontinued operations | 25 | 69 |
| Cash flow from operating activities | 359 | 293 |
| Cash outflows for investments in intangible assets, property, plant and equipment | -175 | -174 |
| Cash outflows for investments in subsidiaries | – | -6 |
| Cash outflows for investments in other shareholdings | -10 | -11 |
| Cash inflows from divestments of intangible assets, property, plant and equipment | 9 | 3 |
| Cash inflows/outflows relating to securities, deposits, and loans | -13 | -7 |
| Cash inflows from interest | 4 | 3 |
| Cash flow from investing activities, continuing operations | -185 | -192 |
| Cash flow from investing activities, discontinued operations | -10 | -20 |
| Cash flow from investing activities | -195 | -212 |
| Cash outflows for dividends to non-controlling interests | -5 | -4 |
| Cash outflows for the purchase of treasury shares | -11 | -13 |
| Cash inflows from the addition of financial liabilities | 45 | 142 |
| Cash outflows for repayment of financial liabilities | -81 | -47 |
| Cash inflows/outflows in connection with financial transactions | -1 | -9 |
| Cash outflows for interest | -18 | -19 |
| Cash flow from financing activities, continuing operations | -71 | 50 |
| Cash flow from financing activities, discontinued operations | -2 | -1 |
| Cash flow from financing activities | -73 | 49 |
| Change in cash and cash equivalents | 91 | 130 |
| Cash and cash equivalents as of January 1 | 988 | 1,004 |
| Change in cash and cash equivalents | 91 | 130 |
| Changes in exchange rates and other changes in cash and cash equivalents | 6 | -1 |
| Cash and cash equivalents as of March 31 | 1,085 | 1,133 |
| Cash and cash equivalents included in assets held for sale | -6 | – |
| Cash and cash equivalents as on the balance sheet as of March 31 | 1,079 | 1,133 |
Prior-year figures restated.
| Nutrition & Care | Resource Efficiency | Performance Materials | ||||
|---|---|---|---|---|---|---|
| in € million | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| External sales | 1,149 | 1,119 | 1,399 | 1,364 | 559 | 601 |
| Internal sales | 9 | 9 | 16 | 11 | 25 | 29 |
| Total sales | 1,158 | 1,128 | 1,415 | 1,375 | 584 | 630 |
| Adjusted EBITDA | 180 | 209 | 324 | 319 | 59 | 65 |
| Adjusted EBITDA margin in % | 15.7 | 18.7 | 23.2 | 23.4 | 10.6 | 10.8 |
| Adjusted EBIT | 103 | 148 | 248 | 251 | 34 | 50 |
| Capital expendituresa | 43 | 127 | 45 | 41 | 11 | 9 |
| Financial investments | 13 | 6 | 8 | – | – | – |
| No. of employees as of March 31 | 8,166 | 8,285 | 10,059 | 10,095 | 1,712 | 1,852 |
Prior-year figures restated.
a Intangible assets, property, plant and equipment.
| Western Europe | Eastern Europe | North America | ||||
|---|---|---|---|---|---|---|
| in € million | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| External salesa | 1,438 | 1,452 | 202 | 191 | 733 | 678 |
| Goodwill as of March 31 b | 2,282 | 2,268 | 50 | 50 | 1,932 | 1,758 |
| Other intangible assets, property, plant and equipment, and right-of-use assets as of March 31b |
4,302 | 3,865 | 32 | 25 | 1,954 | 1,748 |
| Capital expenditures | 82 | 61 | 3 | 1 | 22 | 32 |
| No. of employees as of March 31 | 21,756 | 21,896 | 524 | 598 | 4,326 | 4,522 |
Prior-year figures restated.
a External sales Western Europe: thereof Germany €579 million (Q1 2018: €586 million).
b Non-current assets according to IFRS 8.33 b.
| Total Group | |||||||
|---|---|---|---|---|---|---|---|
| Services Other operations |
Corporate, consolidation | (continuing operations) | |||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| 174 | 160 | 6 | 3 | – | – | 3,287 | 3,247 |
| 488 | 499 | 9 | 7 | -547 | -555 | – | – |
| 662 | 659 | 15 | 10 | -547 | -555 | 3,287 | 3,247 |
| 31 | 35 | -12 | -25 | -43 | -49 | 539 | 554 |
| 17.8 | 21.9 | – | – | – | – | 16.4 | 17.1 |
| -7 | 9 | -18 | -30 | -45 | -52 | 315 | 376 |
| 22 | 16 | 3 | 2 | – | – | 124 | 195 |
| 2 | 4 | – | – | – | – | 23 | 10 |
| 12,071 | 12,138 | 235 | 260 | 279 | 347 | 32,522 | 32,977 |
| Central & South America | Asia-Pacific North | Asia-Pacific South | Middle East & Africa | Total Group (continuing operations) |
|||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| 146 | 141 | 442 | 478 | 214 | 204 | 112 | 103 | 3,287 | 3,247 |
| 32 | 29 | 157 | 150 | 100 | 94 | 19 | 18 | 4,572 | 4,367 |
| 158 | 169 | 635 | 657 | 1,165 | 908 | 7 | 7 | 8,253 | 7,379 |
| 1 | 2 | 5 | 2 | 11 | 97 | – | – | 124 | 195 |
| 667 | 682 | 3,237 | 3,338 | 1,859 | 1,772 | 153 | 169 | 32,522 | 32,977 |
The accounting policies applied in this quarterly statement are the same as those applied in the consolidated financial statements as of December 31, 2018, with the exception of the initial application of IFRS 16 Leases.
Evonik applied IFRS 16 for the first time as of January 1, 2019. The modified retrospective method was used for initial application, so the prior-year figures have not been restated.
IFRS 16 specifies that lessees recognize all leases on the balance sheet at present value in the form of a right-of-use asset and a lease liability. The right-of-use asset is normally depreciated over the term of the lease and the lease liability is increased to reflect interest on the lease using the effective interest method and reduced to reflect lease payments. Consequently, lease expense is no longer recognized in the income statement. The right-of-use asset is subject to an impairment test pursuant to IAS 36 Impairment of Assets.
As of the date of initial application of IFRS 16, right-of-use assets totaling €662 million and a lease liability totaling €666 million were recognized. The following practical expedients were used. Leases formerly classified as operating leases in accordance with IAS 17 Leases were not reassessed to see whether they also meet the definition of a lease in IFRS 16. When determining the term of the lease, extension and termination options were reassessed. Initial direct costs were not included in the measurement of the right-of-use asset. Where the incremental borrowing rate was applied, uniform discount rates were used, taking into account the lease term and economic circumstances of the lease.
In addition, Evonik uses further practical expedients:
The reconciliation from the off-balance-sheet lease obligation pursuant to IAS 17 as of December 31, 2018 and the lease liability recognized on the balance sheet pursuant to IFRS 16 as of January 1, 2019 is as follows:
| in € million | Jan. 1, 2019 |
|---|---|
| Lessee's lease obligation from operating leases as of December 31, 2018 | 747 |
| Reassessment of lease terms and payments | -9 |
| Application of the practical expedient to capitalize non-lease components | 13 |
| Other | 2 |
| Nominal value of lease liability as of January 1, 2019 | 753 |
| Discounting | -87 |
| Additional lease liability due to initial application of IFRS 16 as of January 1, 2019 | 666 |
| Weighted average incremental borrowing rate due to initial application of IFRS 16 as of January 1, 2019 in % | 2.4 |
As of the date of initial application and the reporting date, Evonik recognized the following right-of-use assets in a separate item on the balance sheet:
| in € million | Mar. 31, 2019 | Jan. 1, 2019 |
|---|---|---|
| Land, land rights, and buildings | 167 | 176 |
| Plant and machinery | 320 | 338 |
| Other plant, office furniture, and equipment | 121 | 148 |
| 608 | 662 |
The right-of-use assets for plant and machinery mainly relate to power plants and storage tanks. The right-of-use assets for other plant, office furniture, and equipment mainly relate to rail wagons and transport containers, ships, and motor vehicles.
The lease liabilities are recognized in other financial liabilities.
To improve comparability within the sector, the structure of the cash flow statement has been altered with effect from January 1, 2019.
In future, cash outflows for interest will be presented in the cash flow from financing activities and cash inflows from interest will be included in the cash flow from investing activities. So far, both have been presented in the cash flow from operating activities. Cash outflows for interest amounted to €19 million in the first quarter of 2018 and €121 million for 2018 as a whole. Cash inflows from interest amounted to €3 million in the first quarter of 2018 and €43 million in 2018 as a whole.
In addition, future payments in connection with the contractual trust arrangement (CTA) will be shown in the cash flow from operating activities. In the past, they were presented in the cash flow from investing activities. No restatement was necessary for the first quarter of 2018. For 2018 as a whole, cash outflows totaling €26 million have been reclassified.
Administrative functions have been reorganized as part of the global efficiency enhancement program. In the segment report, functions previously included in "Corporate" have been shifted to the Services segment. Retrospective restatement reduced the adjusted EBITDA and adjusted EBIT of the Services segment by €7 million in the first quarter of 2018 and by €31 million in 2018 as a whole.
Since the methacrylates business has been classified as a discontinued operation, see Changes in the Evonik Group, the executive board of Evonik Industries AG only evaluates the earnings power and decides on the allocation of resources for these operations as discontinued operations. Separate management of the methacrylates business is no longer undertaken. Consequently, only the continuing operations (without the methacrylates business) are included in the segment report. The key figures have been restated retrospectively. This affects the Performance Materials, Resource Efficiency, and Services segments.
In order to sharpen Evonik's focus on less cyclical specialty chemicals, on March 4, 2019 Evonik signed an agreement to sell the methacrylates business to Advent International Corporation, Boston (Massachusetts, USA). The methacrylates business, which comprises large-volume monomers such as methylmethacrylate (MMA), various specialty monomers, and PMMA molding compounds and semi-finished products marketed under the PLEXIGLAS® brand, constitutes a major line of business and has therefore been classified as a discontinued operation.
On the balance sheet as of March 31, 2019, the assets and liabilities of the disposal group are presented as held for sale without restatement of the prior-year figures. The discontinued operation is also stated separately in the income statement and cash flow statement, and the prior-year figures have been restated in each case.
Since the agreement is subject to approval by the authorities in several countries, the divestment of the methacrylates business is expected to take effect in the third quarter of 2019. The transaction will mainly comprise share deals.
The income of €39 million (Q1 2018: €68 million) from discontinued operations comprises the operating income of the methacrylates business. A breakdown is shown in the table:
| in € million | 2019 | 2018 |
|---|---|---|
| Income | 417 | 437 |
| Expenses | -359 | -339 |
| Operating income before income taxes, methacrylates business | 58 | 98 |
| Income taxes | -19 | -30 |
| Operating income after taxes, methacrylates business | 39 | 68 |
| Event | Date |
|---|---|
| Annual Shareholders' Meeting 2019 | May 28, 2019 |
| Report on Q2 2019 | August 1, 2019 |
| Report on Q3 2019 | November 5, 2019 |
Published by
Evonik Industries AG Rellinghauser Strasse 1-11 45128 Essen, Germany www.evonik.com
Communications Phone +49 201 177-3315 [email protected]
Investor Relations Phone +49 201 177-3146 [email protected]
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