Preliminary figures for fiscal year 2007

“We are delighted with our successful start. Our strategy is working. Our results are really good. We have far exceeded our targets and we are creating value," said Dr. Werner Müller, Chairman of the Executive Board of Evonik Industries AG. “With this successful year, Evonik is well-prepared for the capital markets.”

Strong rise in earnings
Sales increased by 2% to €14,430 million (2006: €14,125 million) despite the divestment of non-core operations and adverse exchange rate movements. Business outside of Germany accounted for 60% of sales.

EBIT before exceptional items rose 14% to €1,348 million (2006: €1,179 million). This very good result was achieved even though Evonik had to bear additional corporate management costs (Corporate Centre) from January 1, 2007. These expenses were previously borne by its former parent company, RAG Aktiengesellschaft, and amounted to €111 million in 2006.

All three business areas contributed to the improvement in EBIT. The Chemicals Business Area benefited from higher demand, an improvement in selling prices, lower depreciation and the successful restructuring carried out in recent years, enabling it to lift EBIT 16% year-on-year. The Energy Business Area´s EBIT rose by 15% due to the strong development of its foreign power stations as well as profit from the reduction of its stake in the Mindanao power station in the Philippines. In the Real Estate Business Area, optimization of processes and organizational structures resulted in a slight improvement in EBIT.

“Evonik’s portfolio mix of stable earnings generators and dynamic growth drivers showed very good results,” said Müller.

Systematic focus on profitable growth and value creation
Evonik is building its presence in future growth markets on the back of underlying mega-trends such as energy efficiency, health & wellness, globalization & demographic change. The company has budgeted around €1.5 billion for capital expenditure for intangible assets, property, plant and equipment in 2008 and total capital expenditure for intangible assets, property, plant and equipment of €4 billion is planned for 2008-2010. A large integrated facility to produce high-performance specialty polymers for the attractive Asian market is currently under construction in Shanghai, China. The company also intends to further strengthen its position in the attractive photovoltaic market by investing a sum running into triple-digit millions of Euros in the next few years. Evonik is currently erecting Europe's most modern coal-fired power station in Duisburg-Walsum, Germany, with rated output of 750 megawatts and efficiency of over 45%. There are plans to build further power stations in Turkey and Southeast Asia.

Research, development and innovation are key elements in Evonik’s strategy of sustained value creation and profitable growth. Products, processes and applications developed in the past five years account for about 20% of sales in the Chemicals Business Area. Total R&D spending was €307 million in fiscal year 2007. “As the creative industrial group from Germany, we will continue to invest heavily in research and development in the future,” said Müller.

Returns well in excess of capital costs
With a return on capital employed (ROCE) of 9.5%, Evonik significantly exceeded both its capital costs of 8% and the previous year’s ROCE of 8.4%, despite an increase in capital employed. Economic value added—defined as the positive difference between ROCE and the cost of capital, based on capital employed—was €207 million in 2007. Positive contributions came from all three business areas.

Improved cash flow - sound balance sheet
Cash flow from operating activities increased by 6% to €1,215 million (2006: €1,142 million) thanks to the good operating performance. A further cash inflow of over €1 billion came from the divestment of non-core businesses. Evonik used its high cash flow to fund investment in capital expenditure for intangible assets, property, plant and equipment of €1,032 million. That was above both the prior year’s level of €935 million and depreciation, which came to €862 million. The increased cash flow was also used to reduce net financial debt to €4.6 billion, a reduction of €0.8 million from year-end 2006. “Evonik has a solid balance sheet and is well financed," said Heinz-Joachim Wagner, CFO of Evonik Industries AG.

Increased customer focus and leaner structures to raise efficiency
With a view to the strategic development of the Group, Evonik continued its systematic focus on its core businesses and streamlined its structures. Following the introduction of leaner management and administrative functions for the entire Group and an optimized structure for the Real Estate Business Area at the start of 2007, the Chemicals Business Area was reorganized at year-end 2007. Amalgamating the twelve business units in this business area into six, effective January 1, 2008, is expected to further increase efficiency and strengthen market focus. Synergies in the areas of Sales and Marketing were realized, and the customer focus was further sharpened.

Glossary:
EBITDA = EBIT before depreciation, amortization, impairment write-downs and exceptional items
EBIT = Earnings before interest, taxes and exceptional items

Evonik Group: Excerpt from the Income Statement

Additional information on results
The Chemicals Business Area generated organic growth of 9%. Thanks to strong global demand, this business area was able to recoup at least some of the rise in raw material costs by raising prices to customers. Including currency and consolidation effects, sales increased 3%. The Energy Business Area grew sales by 9% year-on-year thanks to volume and price trends, while the Real Estate Business Area reported a drop in sales revenues as a result of lower property sales.

The non-operating loss of €370 million reported by continuing operations in fiscal 2007 (2006: non-operating loss of €517 million) principally comprised impairment write-downs on the Degussa brand following the introduction of the new Evonik brand, and expenses for restructuring the Group and the plans to enter the capital market.

The €19 million improvement in net interest expense to €451 million was mainly due to the reduction in net financial debt. The significant rise in operating profit resulted in a sharp hike in income before i ncome tax from continuing operations from €192 million to €527 million.

The income before income tax of €630 million reported for the discontinued operations predominantly comprises the book gains from the divestment of the mining technology and gas distribution operations. The previous year’s high level of €1,311 million was principally attributable to book gains from the divestment of the construction chemicals and food ingredients activities.

Due to the high income posted in 2006 by the discontinued operations, income before income tax fell 23% to €1,157 million in 2007. The tax rate for the continuing operations was 30%, reflecting a tax gain of €49 million attributable to the use of a lower tax rate to calculate deferred tax in connection with the changes in the German corporation tax system effective in 2008. Taxes for discontinued operations were impacted by tax-free divestment gains.

In view of the high divestment gains in the previous year, net income after tax and minority interests dropped 16% to €876 million (2006: €1,046 million) as expected.

Technology Specialties
The Technology Specialties segment saw sales rise 2% to €4,898 million. After adjusting for changes in the scope of consolidation, chiefly non-core activities divested in fiscal 2006, sales were up 4%. Higher volume sales, and an increase in selling prices to pass on the sharp rise in raw material costs over the past couple of years, boosted sales by 3 percentage points each, while exchange rate movements held back the rise in sales. EBIT climbed 14% to €454 million due to significantly higher demand, improved selling prices and the success of restructuring and cost-cutting initiatives. At the same time, there was a decline in the depreciation of assets capitalized as part of the purchase price allocation for the acquisition of Evonik Degussa GmbH. This segment’s two business units - Industrial Chemicals and Inorganic Materials - both reported a year-on-year improvement in earnings.

Consumer Solutions
Overall, 2007 was a good year for Consumer Solutions. There was high global demand for its products and it was able to raise some selling prices. Leaving aside changes in the scope of consolidation, especially the businesses divested in 2006, sales rose 8% to €2,871 million. Higher volumes and successful restructuring lifted EBIT 12% to €219 million. However, the two business units developed differently: Higher volume sales boosted earnings in the Health & Nutrition Business Unit considerably, whereas earnings in the Consumers Specialties Business Unit fell short of the previous year’s level owing to the difficult market situation for superabsorbents.

Specialty Materials
Supported by a noticeable rise in demand, Specialty Materials sales rose 5% to €3,027 million. These favorable conditions enabled it to continue adjusting prices to reflect the substantial rise in raw material costs in recent years. The weakness of the US dollar had a negative influence, however. EBIT increased by 22% to €288 million thanks to higher volumes and prices. At the same time, there was a decline in the depreciation of assets capitalized as part of the purchase price allocation for the acquisition of Evonik Degussa GmbH. The Coatings & Additives Business Unit reported considerably higher earnings than in the previous year. In the Performance Polymers Business Unit, by contrast, the positive trend was undermined by the lower US dollar exchange rate and a recent sharp rise in the price of methanol, resulting in earnings remaining at the previous year’s level.

Energy
Sales rose 9% to €2,799 million in the Energy segment, driven principally by increased volumes following the start-up of the Mindanao power station in the Philippines at the end of 2006. Higher coal prices also contributed to this increase, as the higher cost of coal was passed on to customers under contractual agreements. Exchange rates, especially the weakness of the US dollar, had a negative effect. EBIT improved 15% to €448 million. The main factors here were the successful development of foreign power stations, which benefited principally from the inclusion of earnings from the Mindanao power station for the first full year. Additionally, in November 2007 this segment booked a one-off divestment gain from the sale of 34% of the shares in the Philippine project company to its local partner.

Real Estate
This segment’s sales fell by 12% to €409 million, mainly due to lower sales of residential units as part of the portfolio management and property development activities. EBIT improved 1% to €118 million, with the main impetus coming from more efficient property management and considerable cost-savings resulting from reorganization of this business.

Company information
Evonik Industries is the creative industrial group from Germany which operates in three business areas: Chemicals, Energy and Real Estate. Evonik is a global leader in specialty chemicals, an expert in power generation from hard coal and renewable energies, and one of the largest private residential real estate companies in Germany. Our strengths are creativity, specialization, continuous self-renewal, and reliability. Evonik is active in over 100 countries around the world. In its fiscal year 2007 about 43,000 employees generated sales of about €14.4 billion and an operating profit (EBIT) of more than €1.3 billion (preliminary figures).

Disclaimer
This publication constitutes neither an offer to sell nor a solicitation to buy or subscribe to securities. Any such offer will be made solely on the basis of the Securities Prospectus to be published and registered with the German Financial Supervisory Authority (BaFin). The information legally required to be provided to investors will only be contained in the Securities Prospectus.

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