Evonik Industries AG

Earnings Release • May 4, 2016

Quarterly Statement

January to March 2016

A solid first quarter— Outlook for 2016 confirmed

• Volume trend stable overall despite challenging business conditions
• Decline in selling prices mainly due to far lower raw material costs
• Sales fell 9 percent to € 3.1 billion
• Adjusted EBITDA was € 565 million, 13 percent below the exceptionally strong prior-year period
• Adjusted EBITDA margin at a very good level of 18.2 percent
• Adjusted net income was € 254 million
• Outlook for FY 2016 confirmed

Contents

• 2 Business conditions and performance
• 2 Business performance
• 4 Segment performance
• 6 Financial condition

• 7 Expected development

• 8 Income statement

• 9 Balance sheet
• 10 Statement of changes in equity
• 11 Cash flow statement
• 12 Segment report

Key data for the Evonik Group

in € million	2016	2015
Sales	3,106	3,425
Adjusted EBITDA a	565	650
Adjusted EBITDA margin in %	18.2	19.0
Adjusted EBIT b	389	485
Income before financial result and income taxes, continuing operations (EBIT)	376	448
Net income	240	256
Adjusted net income	254	320
Earnings per share in €	0.52	0.55
Adjusted earnings per share in €	0.55	0.69
Cash flow from operating activities, continuing operations	347	445
Capital expenditures	160	189
Net financial assets as on the balance sheet as of March 31	1,177	548
No. of employees as of March 31	33,600	33,242

^a Earnings before financial result, taxes, depreciation and amortization, after adjustments.

^b Earnings before financial result and taxes, after adjustments.

Due to rounding, some figures in this report may not add up exactly to the totals stated.

From the start of 2016 Evonik has altered its reporting on the first and third quarters. Instead of publishing quarterly financial reports as in the past, it now prepares shorter quarterly statements with focused information on business performance and the Group's business condition aimed specifically at the target group. Further information can be found in the "News & Reports" section of the Investor Relations website at www.evonik.com/investor-relations.

Business conditions and performance

Business performance

Despite the more difficult overall economic environment, our business developed in line with expectations in the first quarter of 2016. The Resource Efficiency segment posted a pleasing development: While sales were steady it was able to raise earnings. In the Nutrition & Care segment, lower volumes and declining selling prices resulted in a drop in both sales and earnings. Lower selling prices, mainly as a result of a reduction in raw material costs, also held back the development of the Performance Materials segment.

Overall, the Evonik Group's sales contracted by 9 percent to € 3,106 million. This was principally attributable to lower selling prices (– 7 percentage points), while volumes were stable overall. Currency and other effects each contributed 1 percentage point to the decline.

Year-on-year change in sales

in %	1st quarter 2016
Volumes	–
Prices	–7
Organic sales growth	–7
Exchange rates	–1
Other effects	–1
Total	–9

Adjusted EBITDA was € 565 million, 13 percent lower than in the exceptionally strong prior-year period. The adjusted EBITDA margin was very good at 18.2 percent. Adjusted EBIT fell 20 percent to € 389 million.

Statement of income

in € million		1st quarter
		2015	Change in %
Sales	3,106	3,425	–9
Adjusted EBITDA	565	650	–13
Depreciation and amortization	–176	–165
Adjusted EBIT	389	485	–20
A djustments	–13	–37
thereof attributable to
Restructuring	–6	–8
Impairment losses/reversals of impairment losses	–	–24
Acquisition/divestment of shareholdings	–	–
Other	–7	–5
Financial result	–34	–63
Income before income taxes, continuing operations	342	385	–11
Income taxes	–98	–115
Income after taxes, continuing operations	244	270	–10
Income after taxes, discontinued operations	–	–11
Income after taxes	244	259	–6
thereof attributable to non-controlling interests	4	3
Net income	240	256	–6
Earnings per share in €	0.52	0.55	–

The adjustments of – € 13 million include restructuring expenses of € 6 million, mainly in connection with the optimization of administrative structures. Other relates, among other things, to expenses for an increase in provisions for the partial retirement program to comply with IAS 19.

The financial result improved very significantly to – € 34 million. Alongside lower interest expense, positive factors included interest income in connection with tax refunds. Income before income taxes, continuing operations

was 11 percent lower at € 342 million. The income tax rate was 29 percent, and thus roughly in line with the expected Group tax rate.

Overall, the Evonik Group's net income slipped 6 percent to € 240 million.

Adjusted net income, which reflects the operating performance of the continuing operations, was 21 percent lower at € 254 million in the first quarter of 2016. Adjusted earnings per share decreased from € 0.69 to € 0.55.

	1st quarter
in € million	2016	2015	Change in %
Adjusted EBITDA	565	650	–13
Depreciation and amortization	–176	–165
Adjusted EBIT	389	485	–20
A djusted financial result	–32	–49
A mortization and impairment losses on intangible assets	10	9
Adjusted income before income taxes		445	–18
A djusted income taxes	–109	–122
Adjusted income after taxes		323	–20
thereof adjusted income attributable to non-controlling interests		3
Adjusted net income	254	320	–21
Adjusted earnings per share in €	0.55	0.69	–

Reconciliation to adjusted net income

Segment performance

Nutrition & Care segment

Key data for the Nutrition & Care segment

	1st quarter
in € million	2016	2015	Change in %
External sales	1,047	1,229	–15
Adjusted EBITDA	293	353	–17
Adjusted EBITDA margin in %	28.0	28.7	–
Adjusted EBIT	240	302	–21
Capital expenditures	41	54	–24
No. of employees as of March 31	7,347	6,927	6

In the first quarter of 2016, the Nutrition & Care segment's sales fell 15 percent to € 1,047 million. Alongside lower volumes, the main reason for this was the decline in selling prices.

As expected, within essential amino acids for animal nutrition the price of methionine normalized compared with the record level of summer 2015. Selling prices of the other amino acids also receded year-on-year. Overall, sales of amino acids were considerably lower than in the prior-year period as a result of weaker demand and lower selling prices. There was also a substantial reduction in sales in the baby care business, where business performance was hampered by overcapacity as well as the reduction in selling prices to pass on the drop in raw material costs. By contrast, business with personal care products and silicone chemicals was very good, with particularly high demand in Europe.

Adjusted EBITDA was € 293 million, which was below the very high prior-year level of € 353 million. The adjusted EBITDA margin remains at an excellent level of 28.0 percent.

In March 2016, Evonik acquired MedPalett AS, Sandnes (Norway). This company specializes in food ingredients containing anthocyanins, which are known for their natural antioxidant properties. This acquisition strengthens the health care portfolio in the area of advanced food ingredients.

On April 6, 2016, Evonik also signed a purchase agreement for the start-up Alkion Biopharma SAS, Evry (France), which specializes in biotechnological production of plantbased active ingredients for the cosmetics industry. This acquisition extends the active ingredients portfolio of the personal care business.

Resource Efficiency segment

Key data for the Resource Efficiency segment

		1st quarter
in € million	2016	2015	Change in %
External sales	1,120	1,124	–
Adjusted EBITDA	256	244	5
Adjusted EBITDA margin in %	22.9	21.7	–
Adjusted EBIT	200	192	4
Capital expenditures	49	46	7
No. of employees as of March 31	8,652	7,908	9

Driven by good global demand, the Resource Efficiency segment registered pleasing volume growth, but selling prices declined slightly overall. Sales were virtually unchanged yearon-year at € 1,120 million.

Business with crosslinkers did very well, benefiting once again from strong demand, especially from North and South America and Western Europe. The catalysts business was supported by the first-time consolidation of the Indian catalyst producer Monarch Catalyst Pvt. Ltd, which was acquired in June 2015. Hydrogen peroxide products registered

high demand for conventional applications, especially in the paper and textile industries, and volume growth was also driven by the production facilities in the Netherlands acquired in October 2015. Volume sales of high-performance polymers were slightly above the good level in the prior-year period.

Adjusted EBITDA improved 5 percent to € 256 million. The adjusted EBITDA margin increased from 21.7 percent to a very good level of 22.9 percent.

Performance Materials segment

Key data for the Performance Materials segment

		1st quarter
in € million	2016	2015	Change in %
External sales	772	851	–9
Adjusted EBITDA	64	72	–11
Adjusted EBITDA margin in %	8.3	8.5	–
Adjusted EBIT	30	42	–29
Capital expenditures	24	47	–49
No. of employees as of March 31	4,384	4,346	1

Sales declined 9 percent to € 772 million in the Performance Materials segment. The reason for this was a further drop in selling prices, which were affected by falling raw material prices. By contrast, volumes increased substantially.

In particular, volumes of performance intermediates increased considerably as a result of good demand and the new production capacities in Marl (Germany) and Antwerp (Belgium). However, selling prices declined further as a result

of the drop in the price of oil, leading to a perceptible reduction in sales. The methacrylates business registered high demand from the automotive industry, especially for polymethylmethacrylates (PMMA), but sales decreased on price grounds.

Adjusted EBITDA was 11 percent lower at € 64 million. The adjusted EBITDA margin was 8.3 percent, down from 8.5 percent in the first quarter of 2015.

Services segment

Key data for the Services segment

		1st quarter
in € million	2016	2015	Change in %
External sales	166	207	–20
Adjusted EBITDA	35	46	–24
Adjusted EBITDA margin in %	21.1	22.2	–
Adjusted EBIT	7	20	–65
Capital expenditures	43	39	10
No. of employees as of March 31	12,710	12,971	–2

Sales fell 20 percent to € 166 million. This was mainly due to an energy- and raw material-driven drop in revenues from procurement and energy supply for external customers at our sites. As a result of lower earnings contributions from Utilities and Waste Management, adjusted EBITDA decreased by 24 percent to € 35 million.

Financial condition

Net financial assets increased to € 1,177 million, a rise of € 79 million compared with December 31, 2015. Thanks to the good cash flow, financial assets rose by € 82 million to € 2,735 million while financial debt was virtually unchanged at € 1,558 million.

Capital expenditures for property, plant and equipment were € 160 million in the first quarter of 2016, 15 percent below the prior-year level of €189 million. For example, a new production facility for ROHACELL structural foam was completed in Shanghai (China). Applications for this product include aircraft and automotive engineering. In principle, there is a slight timing difference in outflows for property, plant and equipment due to payment terms. In the reporting period, cash outflows for property, plant and equipment totaled € 186 million (Q1 2015: € 266 million).

Net financial assets

in € million	March 31, 2016	Dec. 31, 2015
on-current financial liabilities a N	–1,345	–1,361
urrent financial liabilities a C	–213	–194
Financial debt	–1,558	–1,555
C ash and cash equivalents	2,466	2,368
C urrent securities	261	262
O ther financial investments	8	23
Financial assets	2,735	2,653
Net financial assets as stated on the balance sheet	1,177	1,098

^a Excluding derivatives.

Cash flow statement (excerpt)

1st quarter in € million
		2015
C ash flow from operating activities, continuing operations	347	445
C ash flow from operating activities, discontinued operations	–	1
Cash flow from operating activities		446
Cash flow from investing activities	–236	–505
Cash flow from financing activities	–6	733
Change in cash and cash equivalents	105	674

Evonik's cash flow from operating activities was € 347 million. The reduction of € 99 million compared with the good figure for the prior-year period was mainly attributable to operating activities.

Investing activities led to a total cash outflow of € 236 million, mainly for property, plant and equipment and the acquisition of shareholdings, especially in the Norwegian company MedPalett. The cash outflow of € 505 million in the prioryear period was principally for property, plant and equipment and the purchase of current securities as part of our investment strategy.

The cash flow from financing activities comprised an outflow of € 6 million. In the prior-year period, there was an inflow of € 733 million from the issuance of the bond.

In the first quarter of 2016, the free cash flow1 was € 161 million, compared with € 179 million in the prior-year period.

Expected development

Our expectations for global economic conditions are unchanged: Overall we anticipate slightly lower momentum in the global economy, with a year-on-year growth rate of 2.5 percent in 2016.

In these conditions, we are confirming our outlook for the full year: Following a very successful year in 2015, we expect to report slightly lower sales in 2016 (2015: € 13.5 billion) and adjusted EBITDA of between € 2.0 billion and € 2.2 billion (2015: € 2.47 billion).

¹ Cash flow from operating activities, continuing operations, less outflows for capital expenditures for intangible assets, property, plant and equipment.

Income statement

Income statement for the Evonik Group

	1st quarter
in € million	2016	2015
Sales	3,106	3,425
C ost of sales	–2,048	–2,317
Gross profit on sales	1,058	1,108
Selling expenses	–356	–341
R esearch and development expenses	–103	–101
General administrative expenses	–155	–160
O ther operating income	59	115
O ther operating expenses	–124	–174
R esult from investments recognized at equity	–3	1
Income before financial result and income taxes, continuing operations	376	448
Interest income	24	4
Interest expense	–55	–60
O ther financial income/expense	–3	–7
F inancial result	–34	–63
Income before income taxes, continuing operations	342	385
Income taxes	–98	–115
Income after taxes, continuing operations	244	270
Income after taxes, discontinued operations	–	–11
Income after taxes	244	259
thereof attributable to
N on-controlling interests	4	3
Shareholders of Evonik Industries AG (net income)	240	256
Earnings per share in € (basic and diluted)	0.52	0.55

Balance sheet

Balance sheet for the Evonik Group

in € million	March 31, 2016	Dec. 31, 2015
Intangible assets	3,199	3,168
Property, plant and equipment	5,727	5,808
Investments recognized at equity	55	53
Financial assets	134	116
Deferred taxes	1,150	1,110
C urrent income tax assets	11	11
O ther receivables	58	54
Non-current assets	10,334	10,320
Inventories	1,750	1,763
C urrent income tax assets	76	111
T rade accounts receivable	1,817	1,813
O ther receivables	314	265
Financial assets	363	365
C ash and cash equivalents	2,466	2,368
Current assets	6,786	6,685
Total assets	17,120	17,005

Issued capital	466	466
C apital reserve	1,169	1,166
A ccumulated income	5,923	5,821
T reasury shares	–7	–
A ccumulated other comprehensive income	–3	40
E quity attributable to shareholders of Evonik Industries AG	7,548	7,493
Equity attributable to non-controlling interests	80	83
Equity	7,628	7,576
Provisions for pensions and other post-employment benefits	3,528	3,349
O ther provisions	869	854
Deferred taxes	450	479
O ther income tax liabilities	157	150
Financial liabilities	1,383	1,415
O ther payables	106	106
Non-current liabilities	6,493	6,353
O ther provisions	1,213	1,177
O ther income tax liabilities	227	209
Financial liabilities	260	291
T rade accounts payable	900	1,090
O ther payables	399	309
Current liabilities	2,999	3,076
Total equity and liabilities	17,120	17,005

Statement of changes in equity

Statement of changes in equity for the Evonik Group

in € million	Issued capital	Capital reserve	Accumulated income	Treasury shares	Accumulated other com prehensive income	Attributable to share holders of Evonik Industries AG	Attributable to non controlling interests	Total equity
As of January 1, 2015	466	1,165	5,040	–	–244	6,427	95	6,522
Capital increases/decreases	–	–	–	–	–	–	–	–
Dividend distribution	–	–	–	–	–	–	–10	–10
Purchase of treasury shares	–	–	–	–7	–	–7	–	–7
Share-based payment	–	3	–	–	–	3	–	3
Sale of treasury shares	–	–	–	–	–	–	–	–
Income after taxes	–	–	256	–	–	256	3	259
O ther comprehensive income after taxes	–	–	–629	–	277	–352	11	–341
Total comprehensive income	–	–	–373	–	277	–96	14	–82
Other changes	–	–	–	–	–	–	–	–
As of March 31, 2015	466	1,168	4,667	–7	33	6,327	99	6,426
As of January 1, 2016	466	1,166	5,821	–	40	7,493	83	7,576
Capital increases/decreases	–	–	–	–	–	–	2	2
Dividend distribution	–	–	–	–	–	–	–8	–8
Purchase of treasury shares	–	–	–	–7	–	–7	–	–7
Share-based payment	–	3	–	–	–	3	–	3
Sale of treasury shares	–	–	–	–	–	–	–	–
Income after taxes	–	–	240	–	–	240	4	244
O ther comprehensive income after taxes	–	–	–139	–	–42	–181	–1	–182
Total comprehensive income	–	–	101	–	–42	59	3	62
Other changes	–	–	1	–	–1	–	–	–
As of March 31, 2016	466	1,169	5,923	–7	–3	7,548	80	7,628

Cash flow statement

Cash flow statement for the Evonik Group

	1st quarter
in € million	2016	2015
Income before financial result and income taxes, continuing operations	376	448
Depreciation, amortization, impairment losses/reversal of impairment losses on non-current assets	176	191
R esult from investments recognized at equity	3	–1
Gains/losses on the disposal of non-current assets	–	1
C hange in inventories	–5	55
C hange in trade accounts receivable	–25	–244
C hange in trade accounts payable and current advance payments received from customers	–154	–53
C hange in provisions for pensions and other post-employment benefits	–37	–36
C hange in other provisions	50	51
C hange in miscellaneous assets/liabilities	35	86
C ash outflows for interest	–18	–12
C ash inflows from interest	17	2
C ash inflows from dividends	1	2
C ash inflows/outflows for income taxes	–72	–45
Cash flow from operating activities, continuing operations	347	445
C ash flow from operating activities, discontinued operations	–	1
Cash flow from operating activities	347	446
C ash outflows for investments in intangible assets, property, plant and equipment	–186	–266
C ash outflows for investments in shareholdings	–58	–3
C ash inflows from divestments of intangible assets, property, plant and equipment	3	3
C ash inflows/outflows from divestment of shareholdings	–	3
C ash inflows/outflows relating to securities, deposits and loans	5	–242
Cash flow from investing activities	–236	–505
C ash inflows/outflows relating to capital contributions	2	–
C ash outflows for dividends to non-controlling interests	–8	–7
C ash outflows for the purchase of treasury shares	–7	–7
C ash inflows from the addition of financial liabilities	29	795
C ash outflows for repayment of financial liabilities	–22	–48
Cash flow from financing activities	–6	733
Change in cash and cash equivalents	105	674
Cash and cash equivalents as of January 1	2,368	921
C hange in cash and cash equivalents	105	674
C hanges in exchange rates and other changes in cash and cash equivalents	–7	19
Cash and cash equivalents as on the balance sheet as of March 31	2,466	1,614

Segment report

Segment report by operating segments—1st quarter

	Nutrition & Care		Resource Efficiency		Performance Materials
in € million	2016	2015	2016	2015	2016	2015
External sales	1,047	1,229	1,120	1,124	772	851
Internal sales	8	6	9	15	27	34
Total sales	1,055	1,235	1,129	1,139	799	885
Adjusted EBITDA	293	353	256	244	64	72
A djusted EBITDA margin in %	28.0	28.7	22.9	21.7	8.3	8.5
Adjusted EBIT	240	302	200	192	30	42
Capital expenditures	41	54	49	46	24	47
Financial investments	53	–	13	–	4	–
Employees as of March 31	7,347	6,927	8,652	7,908	4,384	4,346

Segment report by regions—1st quarter

	Germany		Other European countries		North America
in € million	2016	2015	2016	2015	2016	2015
External sales	589	667	980	1,042	605	642
Goodwill as of March 31a	1,542	1,542	579	546	354	371
Other intangible assets, property, plant and equipment as of March 31a	2,828	2,769	567	540	1,030	975
Capital expenditures	78	91	12	23	47	31

Prior-year figures restated.

a Non-current assets according to IFRS 8.33 b.

Total Group (continuing operations)			Corporate, consolidation		Other operations	Services
2015	2016	2015	2016	2015	2016	2015	2016
3,425	3,106	–9	–	23	1	207	166
– –		–528	–515	21	9	452	462
3,425	3,106	–537	–515	44	10	659	628
650	565	–67	–55	2	–28	46	35
19.0	18.2	–	–	–	–	22.2	21.1
485	389	–69	–57	–2	–31	20	7
189	160	–	–	3	3	39	43
4	73	–	–	2	2	2	1
33,075	33,600	165	315	758	192	12,971	12,710

	Central and South America		Asia-Pacific		Middle East, Africa		Total Group (continuing operations)
2015	2016	2015	2016	2015	2016	2015	2016	2015
642	192	234	638	733	102	107	3,106	3,425
371	31	33	271	277	–	1	2,777	2,770
975	186	178	1,530	1,722	8	11	6,149	6,195
31	6	19	17	25	–	–	160	189

Financial calendar

Financial calendar 2016

Event	Date
Annual Shareholders' Meeting 2016	May 18, 2016
Interim report Q2 2016	August 5, 2016
Quarterly statement Q3 2016	November 4, 2016

Credits

Published by

Evonik Industries AG Rellinghauser Str. 1-11 45128 Essen, Germany www.evonik.com

Contact

Communication Phone +49 201 177-3341 Fax +49 201 177-3013 info@evonik.com

Investor Relations Phone +49 201 177-3146 Fax +49 201 177-3148 investor-relations@evonik.com

Concept, design and production

BISSINGER[+] GmbH HGB Hamburger Geschäftsberichte GmbH & Co. KG

The English version is a translation of the German version and is provided for information only.