Evonik Shares Fall Most on Record on Weak Profit Target

  • Adjusted Ebitda in 2016 to be EU2 billion to EU2.2 billion
  • Annual sales to drop `slightly' on weak economic momentum

Evonik Industries AG shares fell the most since its April 2013 listing on a weaker-than-expected profit outlook, which is adding pressure on Germany’s second-biggest chemical maker to find acquisition targets.

Adjusted earnings before interest, taxes, depreciation and amortization will probably be 2 billion ($2.2 billion) euros to 2.2 billion euros, down from 2.47 billion euros last year, the Essen, Germany-based company said Thursday in a statement. Analysts had predicted profit of 2.4 billion euros for this year, according to a Bloomberg survey.

“The outlook is weak,” said Heiko Feber, an analyst at Bankhaus Lampe AG, who rates the stock buy. “They will certainly look to see what options they have in mergers and acquisitions.”

Chief Executive Officer Klaus Engel last year set himself a deadline of mid-2016 to either find a suitable target or distribute Evonik’s burgeoning pile of cash, which more than doubled to 2.4 billion euros at the end of last year. After so far failing in its pursuit of Clariant AG and Royal DSM NV, the CEO said Thursday that he’s “intensively” exploring for opportunities to do a big deal that make financial sense.

The shares plunged as much as 14 percent to 24.43 euros. They were trading down 13 percent at 24.66 euros at 11:01 a.m. in Frankfurt, cutting Evonik’s market value to 11.5 billion euros.

State Influence

With no easily obtainable takeover targets in Europe, the German chemicals maker has turned its attention to the U.S., people familiar with the matter said in January.

“We have plans that are still in the drawer,” Engel said on Thursday at the press conference in Essen. “But in these times that are a bit crazy, it’s relatively easy to get financing but the deciding question is how high the buying price is.”

For any large deal, Evonik will need the support of its strategic shareholder, RAG-Stiftung, a state-backed foundation overseeing the cessation of hard-coal mining in Germany. RAG-Stiftung owns 67.9 percent, and intends to retain a 25.1 percent share over the longer term. Evonik has spent just 200 million euros on four bolt-on acquisitions in the last two years. That figure doesn’t include today’s purchase of Norwegian food ingredients manufacturer MedPalett AS for an undisclosed sum.

“An acquisition has to be worth it for the shareholders and they have a big shareholder that will make sure they don’t do anything stupid,” Feber said.

Engel warned in the statement that markets deteriorated further at the turn of the year, and said he will “utilize growth opportunities systematically in 2016.”

Sales this year will probably drop “slightly” from 13.5 billion euros, Evonik said. Analysts surveyed by Bloomberg had predicted a gain to 13.9 billion euros. The price of amino acids used in animal feed will “normalize from the very high prior-year level” and the baby care business is suffering from competitive pressure, Evonik said in its annual report.

Evonik confirmed its mid-term targets, saying it’s still aiming for adjusted ebitda of more than 3 billion euros and sales of about 18 billion euros by 2018. Investors are to receive a dividend of 1.15 euros a share at the annual shareholder meeting in May, in line with estimates.

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