Half-Year Financial Report 2023

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Report on Economic Position – Performance of the Segments

Performance Materials

Performance Materials key data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd quarter
2022

 

2nd quarter
2023

 

Change

 

1st half
2022

 

1st half
2023

 

Change

Sales (external)

 

€2,461 million

 

€1,789 million

 

–27.3%

 

€4,849 million

 

€3,581 million

 

–26.1%

Intersegment sales1

 

€753 million

 

€557 million

 

–26.0%

 

€1,563 million

 

€1,164 million

 

–25.5%

Sales (total)

 

€3,214 million

 

€2,346 million

 

–27.0%

 

€6,412 million

 

€4,745 million

 

–26.0%

Change in sales (external)

 

 

 

 

 

 

 

 

 

 

 

 

Volume

 

1.6%

 

–10.3%

 

 

 

3.5%

 

–14.4%

 

 

Price

 

17.5%

 

–15.3%

 

 

 

21.7%

 

–11.2%

 

 

Currency

 

6.7%

 

–1.7%

 

 

 

6.0%

 

–0.5%

 

 

Portfolio

 

0.0%

 

0.0%

 

 

 

0.0%

 

0.0%

 

 

Sales by region (external)

 

 

 

 

 

 

 

 

 

 

 

 

EMLA

 

€1,255 million

 

€813 million

 

–35.2%

 

€2,397 million

 

€1,652 million

 

–31.1%

NA

 

€625 million

 

€476 million

 

–23.8%

 

€1,229 million

 

€965 million

 

–21.5%

APAC

 

€581 million

 

€500 million

 

–13.9%

 

€1,223 million

 

€964 million

 

–21.2%

EBITDA2

 

€367 million

 

€302 million

 

–17.7%

 

€987 million

 

€475 million

 

–51.9%

EBIT2

 

€204 million

 

€158 million

 

–22.5%

 

€679 million

 

€187 million

 

–72.5%

Cash flows from operating activities3

 

€95 million

 

€26 million

 

–72.6%

 

€301 million

 

€45 million

 

–85.0%

Cash outflows for additions to property, plant, equipment and intangible assets

 

€132 million

 

€103 million

 

–22.0%

 

€226 million

 

€179 million

 

–20.8%

Free operating cash flow3

 

(€37 million)

 

(€77 million)

 

108.1%

 

€75 million

 

(€134 million)

 

.

1

In accordance with internal reporting to the Board of Management since July 1, 2022, these figures also include sales recognized in the amount of cost of goods sold. To ensure comparability, the segment data is presented on a consistent basis.

2

EBITDA and EBIT include the effect on earnings of intersegment sales.

3

An imputed tax rate of 25% has been used since the Annual Report 2022 to calculate income taxes paid by the reportable segments; see the Notes to the Consolidated Financial Statements in the Annual Report 2022, note 4 “Segment and Regional Reporting.” The tax rate for the reference value has not changed.

Second Quarter of 2023

Compared to the prior-year quarter, sales in the Performance Materials segment went down by 27.3% to €1,789 million (previous year: €2,461 million). This was largely driven by lower average selling prices and a decline in volumes sold, which had a decreasing effect on sales of 15.3% and 10.3% respectively. This was attributable in particular to weak demand worldwide, combined with availability constraints, especially in the EMLA region. At the same time, exchange rate movements had a negative effect on sales of 1.7%.

In the EMLA region, sales were down 35.2% to €813 million (previous year: €1,255 million). This is mainly due to a decline in volumes sold and a lower selling price level, both of which had a significantly negative effect on sales, while exchange rate changes had a neutral impact on sales overall. In the NA region, sales were down 23.8% to €476 million (previous year: €625 million). This was primarily driven by lower average selling prices and a decline in volumes sold, both of which had a significant decreasing effect on sales. Exchange rate movements, on the other hand, had no notable effect. Sales in the APAC region declined by 13.9% to €500 million (previous year: €581 million). Contributing factors were a decrease in the selling price level and exchange rate movements, both of which contributed significantly to lower sales. In contrast, higher volumes sold had a slight positive effect on sales compared with the prior-year quarter, which had been adversely affected by logistics bottlenecks.

In the second quarter of 2023, the Performance Materials segment’s EBITDA was down 17.7% on the prior-year quarter, declining to €302 million (previous year: €367 million). This was mainly driven by reduced margins as a result of the unfavorable demand situation, as lower raw material and energy prices were unable to offset the decline in selling prices. Additional negative factors weighing on earnings included a reduction in volumes sold and exchange rate movements. This was offset by the recognition of a receivable for insurance compensation for production stoppages, which had a neutral effect at the Group level, but benefited the Performance Materials segment’s earnings. In addition, lower fixed costs had the effect of increasing earnings.

 

EBIT fell 22.5% to €158 million (previous year: €204 million).

Free operating cash flow decreased 108.1% to €–77 million (previous year: €–37 million), largely driven by lower EBITDA and a higher amount of cash tied up in working capital. The main reason was that cash was freed up in trade accounts payable in the prior-year quarter, while cash was tied up in the current quarter, and this had a negative effect.

Performance Materials
Quarterly Sales

€ million

Performance Materials Quarterly Sales (bar chart)

Performance Materials
Quarterly EBITDA

€ million

Performance Materials Quarterly Sales (bar chart)

First Half of 2023

Sales of the Performance Materials segment decreased by 26.1% to €3,581 million in the first half of 2023 (previous year: €4,849 million), driven to a significant extent by a drop in volumes sold and lower average selling prices, which had a decreasing effect on sales of 14.4% and 11.2% respectively. The first half of 2023 was impacted above all by the unfavorable global demand situation and availability constraints, especially in the EMLA region. In addition, exchange rate movements had a negative effect on sales of 0.5%.

EBITDA was down 51.9% to €475 million in the first half of 2023 (previous year: €987 million). This was mainly driven by reduced margins, as lower raw material and energy prices were unable to offset the decline in selling prices. Additional negative factors weighing on earnings included a reduction in volumes sold and exchange rate movements. This was offset by the positive impact of recognizing a receivable for insurance compensation for production stoppages, which had a neutral effect at the Group level, as well as lower fixed costs.

 

EBIT declined 72.5% to €187 million (previous year: €679 million).

Free operating cash flow declined to €–134 million (previous year: €75 million), driven primarily by the drop in EBITDA. On the other hand, a smaller amount of cash tied up in working capital and a decline in cash outflows for property, plant and equipment and intangible assets had a positive effect.

APAC
Comprises all countries in the Asia and Pacific region.
EBIT / Earnings Before Interest and Taxes
Income after income taxes plus financial result and income tax expense.
EBITDA / Earnings Before Interest, Taxes, Depreciation, and Amortization
EBIT plus depreciation and amortization of property, plant, equipment, and intangible assets.
EMLA
Comprises all countries in Europe, the Middle East, Latin America (excluding Mexico), and Africa.
FOCF / Free Operating Cash Flow
Operating cash flows (pursuant to IAS 7) less cash outflows for additions to property, plant, equipment and intangible assets.
NA / North America
Region comprising Canada, Mexico, and the United States.