Martin Toscano
President and General Manager
Evonik Industries de México
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View from the Top

Evonik: Digitalization, Automation, Relocation Are Here to Stay

By Alejandro Enríquez | Tue, 04/06/2021 - 10:24

Q: How did the pandemic influence Evonik and its clients’ business?

A: When the Covid-19 pandemic started, our top priority was to protect the health and well-being of all our employees, while we focused on securing the value chains we take part in with our chemical specialty products. We adapted our distribution and production operations in the country, following strict safety and health guidelines.

From the very beginning of the pandemic, the chemical sector was labeled as essential. However, many of the industries we participate in were not labeled equally at the beginning. In some sectors, our customers were more affected than others. And obviously, priorities changed as companies adapted to the new reality. This resulted in delays for some projects and acceleration for many others.

Communication channels changed with our customers since we are used to developing projects, with our products and solutions, on-site. We created a variety of online activities where Evonik makes the most of its global network. We brought experts in different technical and commercial areas closer to our customers in Mexico. This was a leap toward higher quality in the way we interact with our customers.

I believe things will not be black and white when it comes to communication channels in the new normal. There will be a mix of on-site communications and virtual meetings. This allows us to make the most of our global footprint by placing experts in front of key stakeholders more efficiently. One of the remaining challenges is implementing strategies to cope with this ongoing situation. We need to evaluate those elements that are here to stay.

B2B companies such as ours have an obligation to think about our role in the future and how disruptions in different sectors will impact our products and technologies. This adds up to a massive advancement of digitalization. In a 12-month period, digitalization grew the equivalent of what we went through over the past 15 years. We remain open and confident we will achieve greater levels of innovation and the development of new technologies along the value chain.

Q: Why did Evonik realign its structure to focus on smart materials, specialty additives, and nutrition & care?

A: Our company structure is systematically oriented toward our operational business. The engine of our company consists of the five divisions with their business lines: Smart Materials, Specialty Additives, Nutrition & Care, Performance Materials and Technology & Infrastructure.

In Mexico, this proved to be the right strategy in 2020 for delivering good results. This is particularly due to the diversity of our product portfolio and it is resilient. And we operate and supply practically to all manufacturing and industrial sectors and markets. To increase the value of the company, we target three strategic focus areas: portfolio, innovation, corporate culture.

Q: The pandemic accelerated different trends, among them additive manufacturing. What is Evonik’s focus in this regard?

A: This is an area where Evonik continues to invest, particularly in the high-performance polymers business line where we participate actively. In this segment, we bet on the future while actively developing these technologies. We have a clear strategy that involves investments and acquisitions, as well. We are aware of the promising future this area represents.

Evonik - Additive Manufacturing
Evonik's products go beyond chemical applications.

Q: What business lines were boosted in Mexico due to the pandemic?

A: In 2020, compared to 2019, we grew our business in Mexico. Some business lines experienced more challenges than others during the peaks of the pandemic but all businesses have proven to be resilient, among them automotive, agriculture, pharmaceuticals, among others. Depending on the sector, our business lines adapted to market conditions and the general situation. This has been essential to navigate the pandemic.

After the announcements made by local authorities in May 2020, automotive, mining and construction were shortly after considered also essential. In 2H20, we started to feel greater levels of recovery. In the automotive industry, a regional effort was made toward industrial recovery involving leaders from Mexico, Canada, and the US. For Mexico, fast recovery in the US is also important due to the role we play in the US auto parts market.

Despite the challenges, it has been a really good year for us, full of learning. Although we continue to navigate the storm, teamwork and our close relationship with customers and key stakeholders have been essential, while being flexible in how we adapt to their needs. Our next challenge is to continue growing in a scenario where supply chains are relocating to the region, a direct consequence not only of the pandemic but also of USMCA. Without a doubt, there is a clear trend to evaluate value chains that allow relocation of operations to North America. 2020 saw also the update of Mexico’s FTA with the EU, which brings additional opportunities to the table. One of the most outstanding sectors that keeps growing is agribusiness. The country is starting to be a reference for food exports to Europe and Asia, on top of being a key player for US food markets.

Q: What changes are here to stay?

A: Process digitalization and automation, the ways we do business and supply chain relocation, mainly from Asia, are trends that are here to stay. Particularly in 2020, the US supply chain relocation created more jobs than FDI. Last year tested all sectors equally. It also allowed us to better understand our capabilities as an organization and team in the country. Without question, human capital continues to be a priority and as organizations, we need to understand what the future is and the kind of profile future business leaders should have based on the challenges we are facing today.

Q: How would you describe a successful strategy for management in times of crisis?

A: Being a performance-oriented organization and one that takes care of human capital is not contradictory. We can be an organization that is extremely results-oriented and at the same time empathize with our people to a large extend. Both elements go hand in hand and this relationship was put to the test during 2020. Adapting leadership and communication to virtual channels has been essential. At Evonik, we implemented a series of measures to support our staff. During weekly meetings, we constantly address the impact of the pandemic, our business forecasts and KPIs, as well as our employees’ well-being.

We accept responsibility for our businesses, our employees, the environment and society. For us, responsible action and economic success belong inseparably together. We began early on to anchor ecological and social criteria in our business decisions in order to pursue new, sustainable paths.

 Q: What are Evonik’s priorities in 2021?

A: The first half of 2021 will be similar to what we saw in 2020 as there will still be a little bit of chaos, while we keep fighting against the virus together. There is an end in sight with the rollout of the different vaccines, but this will take time. Challenges continue and we should remain cautious as in 2020. We also need to be aware that most sectors are showing clear signs of recovery, which is positive.

During 1Q21, I see particular challenges when it comes to logistics. There is a global disruption in logistics that started in Asia. Companies need to be more aggressive in terms of product trading and sourcing. We need to keep focusing on our operations. Meanwhile, there are many innovative ideas in different areas that companies are still defining along with stakeholders. Understanding our role will be important over the next five to 10 years. With the right technologies and tools, our business will remain valid for a market that is adapting to the upcoming changes.

Regarding our presence in Mexico, we remain optimistic. Mexico has a clear role in manufacturing not only in North America but to serve global markets. Unfortunately, it is true that the Mexican federal administration has discouraged some projects in the chemical sector. There is a considerable idle capacity when it comes to the chemical production due to the availability of raw materials and the lack of clarity between key stakeholders. We hope the sector grows its manufacturing capacity over the next year.

We remain optimistic for 2021. There is genuine growth and investments keep arriving to the country despite the macro scenario. The country should not let upcoming opportunities with supply chain relocation fade away across different sectors. Companies across the world continue looking at Mexico as a global export platform. I want to highlight that during 2020, there was a sense of belonging in our Mexican business. Our more than 500 customers stuck with us amid the pandemic. It was not easy and many sectors are still facing difficulties, but we should be proud of how we learned together and are leading beyond chemistry

 

Evonik Industries AG (ETR: EVK) is one of the world leaders in specialty chemicals. The company is active in more than 100 countries around the world and generated sales of €12.2 billion (US$14.45 billion) and an operating profit (adjusted EBITDA) of €1.9 billion (US$2.25) in 2020. Evonik goes far beyond chemistry to create innovative, profitable, and sustainable solutions for its customers. More than 33,000 employees work together for a common purpose: to improve life, today and tomorrow.

Photo by:   Evonik
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst