March 7 (Bloomberg) -- Evonik Industries AG, Germany’s second-largest chemical maker, plans to cut 1,000 jobs in administration as Chief Executive Officer Klaus Engel intensifies a savings program to battle lower selling prices.
The first positive effects are showing from streamlining back-office operations, the Essen-based company said today. Another program to find savings in procurement and production has already started measures to save 280 million euros ($389 million) a year, taking Evonik more than halfway to its 500 million-euro goal by the end of 2016.
Chief Executive Officer Klaus Engel is battling a drop in selling prices that probably won’t recover to the average level of last year, he said today. The company has already slimmed the executive board and said today it will continuously review its investment program and postpone projects if necessary.
“We have made a great effort to shape up the excellence of our operating units,” Engel said at a press conference in Essen. “We have made very good headway with this project.”
The shares rose as much as 3.8 percent, the most in almost four months in Frankfurt trading, to 29.20 euros. The stock was trading up 0.2 percent at 28.18 euros as of 11:07 a.m. local time. The company has lost 14 percent since its initial public offering in April last year, cutting the market value to 13.1 billion euros.
Evonik set a full-year goal for adjusted earnings before interest, tax, depreciation and amortization of 1.8 billion euros to 2.1 billion euros. That’s less than the 2.13 billion euros that analysts had predicted, according to a Bloomberg survey. Only by achieving the top end of the range would Evonik increase annual earnings from last year’s 2 billion euros.
Sales will probably rise less than analysts had predicted. The company’s goal for revenue to increase “slightly” from last year’s 12.9 billion euros contrasts with the 13.5 billion-euro analyst estimate for 2014.
Higher demand for superabsorbants used in diapers and personal care products contrasted with a decline in selling prices for amino acids used in animal feed, the company said. A slowdown in the automotive industry weighed on prices at butadiene-based operations.
Global growth will pick up, though “considerable uncertainty” exists around emerging markets, Evonik said.
The German chemical maker is spending 6 billion euros on expansion through 2016, including a 500 million-euro methionine factory in Singapore that will boost capacity by more than a third.
Management proposed an 8.7 percent increase in the annual dividend payout to 1 euro. The company has set a dividend policy of paying out about 40 percent of adjusted net income, Chief Financial Officer Ute Wolf, said today.
Adjusted Ebitda dropped 15 percent in the fourth quarter to 386 million euros. Analysts had predicted 381.2 million euros. Sales dropped 1 percent to 3.14 billion euros, in line with estimates.
Engel said today that the percentage of shares trading will probably increase in the next few months. Only about 14 percent of shares on the market, with majority owner RAG foundation still holding 68 percent. CVC Capital Partners owns about 17.9 percent. It’s “no secret” that CVC wants to divest its stake, Engel said. RAG Foundation will probably divest shares in the medium to long term, he said.
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