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Evonik to exit performance materials by 2023; to invest EUR3 bn in green tech

Evonik to exit performance materials by 2023; to invest EUR3 bn in green tech

German specialty chemicals firm Evonik says it is embarking on the next phase of its strategic transformation. In line with this, it will exit the performance materials business as it focuses on the specialities portfolio. Preparations are already under way for the exit of all three businesses of Performance Materials - Superabsorbents, Functional Solutions and Performance Intermediates. Evonik aims to find new owners or partners for each of these three businesses in the course of 2023.

It is aligning its portfolio completely to its three growth divisions: Specialty Additives, Nutrition & Care, and Smart Materials. “The businesses we are withdrawing from on strategic grounds are being optimally set up to give them a responsible route to a good future,” said Christian Kullmann, Chairman of Evonik's Executive Board, speaking at the company's Capital Markets Day.

The proceeds from the divestment of the Performance Materials businesses and the operating cash flow in the coming years will be channelled to the green transformation. By 2030, Evonik aims to invest more than EUR3 billion in Next Generation Solutions - products with sustainability benefits. That is around 80% of annual growth investments. In the same period, a further EUR700 million will be invested in Next Generation Technologies, i.e., the optimisation of production processes and infrastructure to avoid CO2 emissions.

Sustainability is being integrated fully and systematically into all elements of the strategy: portfolio management, innovation, corporate culture. “Driven by our purpose, Leading Beyond Chemistry, in recent years we have made good progress both strategically and financially,” Kullmann said. “In the next phase of our transformation, we are executing targeted and massive investments in green growth and making sustainability our central innovation driver.”

“We are greatly increasing our handprint and reducing our footprint at the same time,” said Thomas Wessel, the executive board member responsible for sustainability.

“Translated into KPIs: We will substantially increase the sales share of our Next Generation Solutions from 37% at present to over 50% by 2030.” That includes, for example, drug delivery technologies for controlled release of pharmaceutical active ingredients, gas separation membranes for biogas and hydrogen, as well as natural-based active ingredients for cosmetics. “

Evonik aims to reduce its footprint by significantly cutting both direct and indirect greenhouse gas emissions from production and processing. With the support of Next Generation Technologies, Evonik will reduce its scope 1 and 2 emissions by 25%, from 6.5 million to 4.9 million metric tonnes by 2030.

At the same time, the investments in sustainability are profitable: By investing EUR700 million in Next Generation Technologies, Evonik will cut its operating costs by more than EUR100 million a year up to 2030.

The repositioned Research, Development & Innovation unit is also fully integrating sustainability into the management of Evonik’s innovation activities. “Our RD&I targets are right on track to generate additional sales of more than EUR1 billion with our innovation growth fields by 2030,” said Harald Schwager, the executive board member responsible for innovation. “Our innovative capability is a key factor in leveraging green and profitable growth.”

Evonik’s aspirations are supported by its venture capital activities. A new Sustainability Tech Fund with a total investment volume of EUR150 million will strengthen the sustainability targets by investing into innovative technologies and business models. The focus is on new technologies that will reduce emissions as well as on innovations that have a high technological fit with the Next Generation Solutions.

As part of its strategic transformation, Evonik has also reviewed its mid-term financial targets. “Despite the current challenging environment, we are confirming our core targets: an adjusted EBITDA margin of between 18 and 20%, a cash conversion rate of over 40%, and ROCE of around 11%,” said Evonik’s CFO Ute Wolf.

In line with the full alignment to high-growth, less cyclical specialty chemicals, Evonik now aims to achieve an organic sales CAGR of over 4%. Up to now, the target was volume growth of over 3%. The annual capex budget increases successively from the current level of around EUR900 million to a level between EUR900 million and EUR1 billion over the next years - as a result of investments in Next Generation Technologies to save CO2 emissions.

In addition to these ambitious financial targets, the updated sustainability targets for Evonik's handprint and footprint will be integrated into the executive board's long-term compensation scheme from next year.

(PRA)


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