Evonik streamlines specialty chemical strategy in targeted markets

Although specialty chemicals company Evonik Industries was established under this name as recently as 2007, it has many historic roots that date back to the beginning of German industrialization in the first half of the 19th century.

Creativity, specialization, self-renewal and reliability are some of the company's traditions, said Chairman of the Executive Board Christian Kullmann.

As Evonik's new top executive since May 24 and a more than 10-year worker at the company, Kullmann aims for "a corporate culture in which employees will take action and initiate change".

"I want to establish a corporate culture which drives and rewards outperformance," he said. "In this culture, we act with conviction, clarity and consistency. And what's important for me: We need an open culture. The goal is to develop a more international and diverse mindset that is built on trust, respect and openness."

Evonik started as a mixed-portfolio corporation, but it is now positioned as a pure-play specialty chemicals company, with production plants in 25 countries and regions around the world and more than 35,000 employees by the end of last year.

"Our company can look back on a successful fiscal 2016," said Kullmann, adding that the business performed well although the overall economic environment remained challenging.

According to Chemical & Engineering News magazine, run by the American Chemical Society, the global top 50 companies in the sector saw their combined sales drop 4.4 percent in 2016 to $744.3 billion. However, most of them saw increasing profit.

That pattern was mainly because of reduced prices of chemical products, caused by the falling price of crude oil.

Evonik achieved sales revenue of 12.7 billion euros ($14.9 billion) last year, with earnings before interest, taxes, depreciation and amortization reaching 2.17 billion euros, which it expects to grow to between 2.2 billion euros and 2.4 billion euros this year.

The company spent 438 million euros on research and development in the same year.

"We can capitalize on our strong market positions, customer relations, technology platforms and highly qualified employees. And we have already made good progress in the execution of our strategy," said Kullmann.

With a more balanced and more specialized portfolio strategy, Evonik is striving to become a best-in-class specialty chemicals company.

"We want to put a stronger focus on businesses with a clear specialty chemicals character," he said. "Active portfolio management with regular strategic reviews, as well as improved cost competitiveness will help us to achieve our growth goals with a more balanced portfolio.

"Our goal is for products and applications younger than five years to make up 16 percent of sales in the medium term. A very central task will be to establish a corporate culture that drives and rewards outperformance."

The company has identified four strategic growth engines for more balanced and more specialized growth - specialty additives, animal nutrition, smart materials, and health and care.

"In these growth engines we already have strong leadership positions and we will strengthen them further," Kullmann said.

To expand its profitable business in Asia and the Americas, Evonik purchased the specialty additives sector of Air Products in the United States last year.

It also acquired the cosmetics specialist Dr. Straetmans GmbH in Hamburg, Germany, earlier this year, which specializes in developing and marketing alternative preservatives for the cosmetics industry.

The move has allowed Evonik to complement the broad specialties portfolio of its cosmetics business and to further consolidate its position as a leading global partner for the cosmetics industry, Kullmann said.

To get close to its customers and to understand their needs today and in the future in a better way, Evonik restructured its innovation portfolio. It now focuses on fields with above-average growth rates, such as sustainable nutrition, advanced food ingredients, membranes, additive manufacturing and cosmetic solutions. The company aims to generate more than 1 billion euros in additional sales in these areas by 2025.

Other key success factors for Evonik's R&D are close collaboration with customers and networking with external partners, including research institutions, universities and other industrial companies, "so that the latest findings in chemistry, biology and physics can rapidly be transported into our business".

One of the most recent examples is a cooperation agreement signed with China's Sinopec Beijing Research Institute of the Chemical Industry in late June, to build a process development lab for special membrane technology.

China is moving from its old, low-cost growth drivers toward new industries fueled by innovation-driven development.

"I see continuing opportunities in China's chemicals market. One opportunity for the chemical industry in China lies in the nation's increased urbanization, the other is consumption upgrades, indicating improved living standards and demands for high-quality products," he said.

Evonik invested "a high two-digit million euros sum" to build a new specialty silicone plant in Shanghai, to support its customers in China and countries nearby more rapidly and flexibly.

Kullmann said the demand for specialty silicones has grown strongly over the past few years, and China and its neighboring countries are key markets for many applications.

Thanks to the new plant, the company will also be consolidating its position as the global market and technology leader for organically modified specialty silicones, which form part of specialty additives - one of four growth engines where the company sees high potential for growth and margins, he added.

He also sees opportunities in China's western regions as they enjoy the government's support in various areas, including infrastructure construction, investment and environmental protection, which will benefit multinational companies such as Evonik.

To improve its local presence and business development, Evonik set up a Go West strategy, under which its Chengdu office in Sichuan province opened in 2012.

"To keep Evonik in China on course, we have been working hard on growth opportunities," Kullmann said. "We are exploring new business opportunities in some key Asian industries, such as electronics, automotives and medical devices. We also continue to focus on solutions to China-specific trends such as green development."

zhangzhao@chinadaily.com.cn

(China Daily 09/08/2017 page7)