Evonik AG says it will 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 chemical 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. Groupwide 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 organizational 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 euros ($434 million) annually after the program's completion in 2026. Around 80 percent of the savings will derive from personnel reductions, while the rest are expected to come from lower material costs.
The program was prompted by a sustained decline in earnings. In 2023, Evonik’s sales fell by 17 percent to 15.3 billion euros ($16.6 billion) vs. the previous year. Its earnings fell 33 percent to 1.6 billion euros ($1.75 billion) and selling prices declined by 3 percent. Evonik reported a net loss of 465 million euros ($504 million) in 2023 due to "exceptionally high impairments and burdens from structural measures." it said in a statement. For 2022, it reported a net income of 540 million euros ($586 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 Chairman Christian Kullmann. “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. Indorama 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 during a "chemical summit" asking for a bridge electricity price for industry, which failed to materialise.