ESSEN (dpa-AFX) - The weak economic environment continues to put specialty chemicals group Evonik under stress. Because the management around chief executive Christian Kullmann does not expect any improvement in the rest of the year after a weak second quarter, the Essen-based company noticeably curbed its business forecasts on Monday. "In the course of the first quarter, there had been signs in our businesses of a recovery for the rest of the year," Kullmann said, according to the statement. "Unfortunately, this recovery turned out to be much weaker in May and June than we had expected." The stock fluctuated in the wake of the lowered outlook, most recently up 0.5 percent.

Evonik joins a long list of European chemical companies suffering from weak conditions, wrote analyst Chris Counihan of investment bank Jefferies. Baader Bank expert Konstantin Wiechert had already expected a profit warning, according to the bank. However, the trimmed targets were now even weaker than he had feared anyway.

The chemical industry as a whole felt the effects of customer restraint, especially after the turn of the year, as customers ordered less due to the economic downturn and bulging inventories. Kullmann is now only forecasting earnings before interest, taxes, depreciation and amortization adjusted for special items of between €1.6 billion and €1.8 billion. Previously, Evonik had been targeting the lower end of the old range of €2.1 billion to €2.4 billion.

Evonik also expects demand to remain weak over the second half of the year without any economic recovery, it said. The group now estimates annual sales at €14 billion to €16 billion, down from €17 billion to €19 billion previously.

Demand remained very weak across all end markets in the second quarter, with customers continuing to run down their inventories. Overall, volumes sold remained at the very low level of the previous quarter. Although Evonik's preliminary figures indicate that operating profit is likely to have increased slightly compared with the three months at the beginning of the year, to between €430 million and €450 million. However, this would represent a drop of up to a good 40 percent compared with the same period of the previous year (€728 million). However, experts had only expected 448 million.

According to the company, this was supported by the cost-cutting efforts initiated. In the second half of 2022, the company had started to cut costs: Vacant positions will not be filled, external service providers will be contracted more economically, and Evonik is also tightening the reins on travel expenses. After the first six months, CFO Maike Schuh is again cutting capital expenditure, which is to be reduced from €900 million to €850 million. In this way, the manager wants to keep the impact on free cash flow in check. To this end, further projects will be postponed and cuts will also be made.

Weak demand caused sales to fall to just under €4 billion in the months from April to June - a year earlier Evonik had still posted €4.8 billion in earnings. Analysts had expected slightly more business, according to the company. The company will present its full quarterly report on Aug. 10.

The divisions for food ingredients (Nutrition & Care) and innovative materials (Smart Materials) performed particularly poorly. In the food business, prices for the animal feed protein methionine continued to fall slightly - although a more stable situation is foreseeable for the third quarter, it said. In innovative materials, a planned maintenance shutdown for polyamide plastic had a negative impact, but both the first and the new second plant would now be available from July./men/jcf/he