Evonik expects lower methionine volumes in Q3

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In its Q2 financial results, Evonik reported good demand and improved market sentiment in its animal nutrition business towards the end of the quarter. 

It expects lower volumes for that business in Q3 though.

Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for its nutrition and care segment in Q2 2017 was €196m versus the €264m in Q2 2016. Lower prices in animal nutrition was the main reason for earnings below prior, said Evonik, as it released its results yesterday (3 August).

Ute Wolf, CFO, on a conference call with analysts yesterday, said the company had successfully managed higher raw material costs in nutrition and care segment in Q2.

The segment has proven in that quarter that it is more than methionine, she said.

The overall market sentiment for methionine improved towards the end of the quarter; volumes were strong especially in May and June, and this momentum incentivized the company to increase its methionine prices globally at the beginning of July, said Wolf. “First indications regarding customer acceptance are positive. However, today, it is too early to judge on the sustainability.”

The CFO said Evonik expects lower methionine volumes in Q3 due to the strong May and June and because of the price increases, implemented in July.

The company also reported on its nutrition and care segment’s first half 2017 performance; it said sales for the division rose 5% to €2.28bn in the first six months. “This was attributable to the initial consolidation of the business acquired from Air Products, and to slight volume growth. On the downside, selling prices for feed additives were substantially lower than in the prior-year period.”

Adjusted EBITDA for the nutrition and care divison fell 31% to €385m in the segment in the first half 2017, it said. 

Growth engine

The company continues to sees animal nutrition as one of its ‘growth engines’ despite the negative price effects.

It reported several initiatives underway to capitalize on the growth potential for sustainable animal nutrition.

While aiming to strengthen its leading position in methionine, itt is also looking to enable antibiotic-free livestock production through probiotics, while improving feed conversion rate and meat quality with its feed additive, CreAMINO.

Both its probiotics and CreAMINO offer significant upside potential for the group’s portfolio, said Christian Kullmann, CEO of Evonik, on the call with analysts.

Moreover, it is developing an omega-3 fatty acid product from marine microalgae in collaboration with DSM, which provides “a nice synergy potential” he said. 

It also intends to ramp up production at its L-lysine production site in Brazil, and it wants to optimize its line of bio-amino acids. “We have never been really satisfied with the financial performance [of our bio-amino acids],” added the CEO.

Evonik said the overall group was on target after the first half of 2017, with sales growing 15% to €7.3bn in the first six months of the year. Its adjusted EBITDA for that period rose 8% to €1.25bn, it added.

It expects adjusted EBITDA for FY2017 to grow to between €2.2bn and €2.4bn versus €2.165bn in 2016. 

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