Evonik has announced plans to cut up to 2,000 jobs worldwide, with around 1,500 job cuts to be made in Germany.
A ‘disproportional’ number of management positions will be cut, the German chemicals company said in a statement announcing its 2023 financial results. The number of hierarchical levels below the Executive Board will be reduced to a maximum of six. Group-wide managers will start leading a median of seven direct reports, compared to the current span of one to four.
The announced measures are part of a company restructuring plan called ‘Evonik Tailor Made’. Evonik wants to design and establish a new organisational structure that eliminates administrative activities that do not ‘directly support its businesses’ by the end of 2026, it said in a statement.
Evonik expects cost reductions of around €400 million annually after the programmes’ completion in 2026. Around 80% of the savings will derive from personnel reductions, whilst the rest are expected to come from lower material costs.
The programme was spearheaded by a sustained decline in earnings. In 2023, Evonik’s sales fell by 17% to €15.3 billion in comparison with the previous year. Its earnings (EBITDA) fell by 33% to €1.6 billion and selling prices declined by 3%. Evonik reported a net loss of €465 million in 2023 due to ‘exceptionally high impairments and burdens from structural measures’, it said in a statement. In the previous year, Evonik reported a net income of €540 million.
The company does not expect an economic recovery in 2024.
"We must not delude ourselves, even if there are slight signs of a recovery,” said Christian Kullmann, chairman of the executive board. “What we are currently experiencing are not cyclical fluctuations, but massive, consequential changes of our economic environment.”
The economic woes affecting Evonik have had similar effects in many other companies in the plastic industry. Indurama Ventures has also announced a company restructuring following an expressive decline in earnings.
In September 2023, the heads of Evonik and Covestro met Germany’s chancellor Olaf Scholz (SPD) during a ‘chemical summit’ asking for a bridge electricity price for industry, which failed to materialise.