Germany's Evonik profit beats as Iran conflict drives stockpiling among customers
Evonik's First-Quarter Performance and Market Impact
May 8 (Reuters) - German chemicals group Evonik reported first-quarter core profit above market expectations on Friday, supported by short-term customer stockpiling in response to supply chain disruptions caused by conflict in the Middle East.
Sales Surge Amid Middle East Conflict
The Essen-based group said it recorded a spike in sales since March due to supply-chain uncertainty linked to the Iran war, echoing first-quarter comments from Dutch peer dsm-firmenich.
Customer Stockpiling and Demand Trends
"This is presumably not due to a real rise in demand but due to purchases of inventories as customers endeavour to protect themselves from supply chain disruption and rising prices," the group said.
Product Segments with Increased Orders
Evonik said orders rose for high-performance polymers, lubricant additives, and cross-linkers, which enhance material durability.
Analyst Reactions and Financial Outlook
Analysts at Jefferies said they expect the share price to find support after the group showed "strong results (and) good momentum".
Second-Quarter and Full-Year Expectations
Evonik said it expects second-quarter core profit to rise 8% year-over-year to at least 550 million euros ($647 million), making it the strongest quarter of the fiscal year.
It added rising inflation, and a later drop in demand will likely lead to lower volumes in the second half of the year.
First-Quarter Financial Results
Evonik's first-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 15% to 475 million euros, beating analysts' forecast of 448 million euros from analysts polled by Vara research.
Industry Challenges and Company Response
The German chemical sector, the country's third largest industry, has been struggling for years with subdued demand coupled with high energy costs, supply chain issues, and a sluggish economy.
Cost Management and Restructuring
Evonik said it was forced to raise prices due to a rapid rise in energy and raw material costs.
To manage costs, Evonik is cutting 1,000 jobs this year as part of an ongoing restructuring program. The group also amended its dividend policy in February to 1 euro per share, its lowest since 2014.
Additional Information
($1 = 0.8497 euros)
(Reporting by Dimitri Rhodes in Gdansk; Editing by Christoph Steitz and Rashmi Aich)
