Evonik and Kenvue beat analyst estimates with robust Q1 performance amid job cuts

08 May 2024 --- Evonik says it has “surpassed expectations” in its Q1 financial performance, with net income surging by €109 million (US$177 million) to €156 million (US$168 million). Meanwhile, Kenvue’s Q1 results exhibited a 1.1% increase in net sales, hitting US$3.9 billion. 

Evonik “on track”
The specialty chemicals company’s adjusted net income was €197 million (US$212 million), up from €115 million in the previous year, and adjusted EBITDA surged by 28%, reaching €522 million (US$561 million) in the first quarter.

The performance also extends to free cash flow, which stood at €127 million (US$136 million), marking an improvement compared to €21 million (US$23 million) for the same period last year.

“Many of our customers are buying again,” says Evonik CEO Christian Kullmann. “However, there is still restraint in some industries and markets, so we are not seeing a broad-based upturn yet.”

Despite challenges such as price declines of 5% due to lower raw material prices, Evonik increased sales volumes by 4%. The company’s emphasis on operational efficiencies and cost-cutting measures has helped it increase its adjusted EBITDA margin, which has risen to 13.8%.

“The margin improvement shows we are on the right track,” says chief financial officer Maike Schuh. “Our cost-cutting measures are increasingly taking effect, which is particularly important as prices declined once again. There is still a long way to go until we reach our financial targets. We have to work for every small improvement.”

Evonik increased sales volumes by 4%.Nutrition & Care performance
Sales for the Nutrition & Care division increased by 2% in the first quarter, hitting €900 million (US$967 million). While currency effects impacted overall gains, this growth was driven by slightly higher sales prices and rising demand. 

Due to increased volumes, lower variable costs and optimization savings in the Animal Nutrition segment, the division’s adjusted EBITDA increased by 84% to €140 million (US$150 million).

By the end of the year, Evonik Tailor Made, the company’s efficiency initiative, is expected to start to show financial benefits. After reaching a consensus on “socially responsible job cuts,” the company is moving forward with implementation while putting employee representatives first. 

Kenvue Oral Care leads
Kenvue experienced a 1.9% organic growth rate, which reflected continued momentum in essential health and self-care categories. 

The company’s performance in the Skin Health and Beauty segments was challenging but noteworthy in Oral Care.

Its Self Care division had an organic growth of 4.2%, comprising 5.6% value realization, realization partially offset by (1.4%) volume. The Skin Health and Beauty had an organic growth decrease of 4.5% offset by 6.9% volume.

Kenvue will cut its global workforce by approximately 4%.The gross profit margin expanded to 57.6% compared to the prior year period. Kenvue attributes this improvement to value realization efforts, global supply chain efficiencies and managed input cost inflation.

“We entered 2024 with clear strategic priorities to reach more consumers, reinvent our ways of working to invest more behind our brands, and foster a culture that rewards performance and impact,” comments Kenvue’s CEO, Thibaut Mongon. 

“We began executing against these priorities during the quarter, enabling a solid start to the year and advancing Kenvue forward in our ambition to become the undisputed leader in consumer health.”

Restructuring and job slash
Despite a decline in the operating income margin to 14.1%, primarily due to restructuring expenses and impairment charges, the adjusted operating income margin increased to 22%.

“To further strategic initiatives, the company’s Board of Directors approved an initiative on May 6, 2024, which anticipates a net reduction of its current global workforce of approximately 4% and ongoing annualized pre-tax gross cost savings of approximately US$350 million that will be fully realized in 2026, of which a portion will be reinvested back into the company’s brands to fuel growth,” says Kenvue.

“As we exit services under the TSA, these initiatives will structurally position Kenvue for success in the future and create long-term shareholder value,” says Paul Ruh, chief financial officer.

“These initiatives will enable Kenvue to adjust its cost structure and ways of working to become more competitive while bolstering our ability to deliver on our long-term algorithm of profitable growth, robust, durable cash flow generation and disciplined capital allocation.”

Kenvue is optimistic about the rest of 2024, despite obstacles like foreign exchange headwinds. 

By Venya Patel