Evonik Seeks Growth Through Acquisitions Amid Investment Cut

Evonik Industries AG is seeking growth through acquisitions for its consumer, health and nutrition unit as well as the resource efficiency division as it cuts spending for projects that expand current operations.

Investment through 2016 will now be about 5.5 billion euros ($6.9 billion), down from a previously projected 6 billion euros, the Essen, Germany-based chemical maker said today at an investor event at its second-biggest site in Hanau near Frankfurt.

Chief Executive Officer Klaus Engel is reorganizing Evonik, making its three main divisions separate legal entities to give them more independence. The two specialty units are expected to post above-average and profitable growth and will get the bulk of the investment budget. Cost cuts will be sought for the third, a materials division, and the company may look for alliances to improve its market position.

“With our new structure, we are more able at the board level to dedicate time to larger transactions,” Engel said today about the company’s acquisition plans.

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Chief Financial Officer Ute Wolf said that Evonik has the resources to execute a “sizable” acquisition and issuing equity to pay for a purchase is a possibility.

The chemical maker is also reshuffling business units among its three main segments, Engel said today. Active oxygens, a precursor to polyurethanes, and polyamid 12, a plastic material used in sport shoes and pipes, will be moved to the resource efficiency segment. A cyanide business called CyPlus Technologies will move to the specialty materials segment.

The two specialty chemicals units, which make ingredients for animal feed and household cleaning agents as well as catalysts and oil additives, are in niche markets with high margins, the CEO said today.

“Moving forward we will concentrate growth capex clearly in these segments,” Engel said. “Ultimately, specialty materials will be run for cash rather than growth.”

The chemical maker today confirmed 2018 targets for sales of about 18 billion euros and adjusted earnings before interest, tax, depreciation and amortization of more than 3 billion euros. Goals for this year also haven’t changed, CFO Wolf said.

Basis investment through 2016 to maintain production and meet regulatory requirements will remain at 2 billion euros, the company said. Growth investment for new factories and capacity additions has been cut to 3.5 billion euros from 4 billion euros.

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