Evonik’s Earnings Beat and Cost Cuts Win Over Morgan Stanley as Margin Pressure Lingers

Evonik posts stronger-than-expected adjusted EBITDA despite 9% sales drop, driven by restructuring and job cuts; stock surges 33% year-to-date.

Evonik entered 2025 with a new finance chief, a thinning workforce, and a market that had already priced in plenty of optimism. The specialty chemicals group has delivered exactly what investors wanted: lower revenue, but better earnings.

First-quarter sales landed at €3.43bn, a drop of roughly 9% year-on-year, with currency effects accounting for more than half the decline. Volumes slipped 2% and selling prices eased 1%. Yet adjusted EBITDA came in at €475m, comfortably ahead of the internal target of around €450m. The gap between top-line weakness and bottom-line resilience reflects the bite of a restructuring programme that is now in its final year.

That programme, dubbed “Evonik Tailor Made”, is designed to slim down administration and streamline operations. The group plans to cut about 1,000 jobs worldwide this year. By the end of March, it employed roughly 30,600 people. The logic is straightforward: when the market fails to provide a tailwind, cost discipline must fill the void.

The market has taken notice. Morgan Stanley on Thursday reiterated its “Overweight” stance and lifted its price target from €18 to €19, pointing to the breadth of Evonik’s portfolio across five segments. The bank highlighted the company’s strong positions in specialty additives and nutrition products as pillars of stability in a volatile environment.

Since the start of the year, Evonik’s shares have surged roughly 33% and closed at €17.78 on Thursday. The strong run has pushed the 14-day relative strength index to 70.8, a level that traditionally signals overbought conditions and raises the risk of short-term profit-taking. Still, the stock trades nearly 20% above its 200-day moving average, keeping the long-term uptrend intact.

That technical picture coexists with an operating environment that remains demanding. Geopolitical tensions in the Strait of Hormuz have disrupted supply chains for chemicals and polymers, driving up freight rates and tightening availability. In Europe, the cost base is under pressure: German inflation climbed to 2.9% in April, fuelled by higher energy prices, while the EU’s full-scale carbon border adjustment mechanism, in effect since January, adds further cost for importers.

Energy exposure is a particular risk. Evonik can cushion part of the blow through local production and raw-material sourcing, but recent price spikes have underscored the vulnerability. The impact shows in the divergent fortunes of peers: chemical distributor Brenntag saw operating profit fall by more than 8% in the first quarter, while Bayer’s agriculture division reported a currency-adjusted sales increase of nearly 7%.

In May, Michael Rauch took over as chief financial officer, succeeding Claus Rettig. The change comes as the company sharpens its focus on specialised applications. The Advanced Technologies segment remains sensitive, with high-performance polymers and animal-feed additives exposed to volatile raw-material prices, though short-term customer stockpiling and recovering methionine prices are providing some support.

Looking ahead, Evonik is sticking to its 2026 target of adjusted EBITDA in a range of €1.7bn to €2.0bn. For the current quarter, it expects at least €550m, which could make it the strongest period of the cycle. The annual general meeting in June will offer a forum for discussing cost targets, portfolio priorities, and the role of the new CFO. If the second half tests pricing power and demand again, the savings from Tailor Made will be the buffer that keeps the earnings story intact.