Covestro increased its volumes sold, in particular in the APAC and EMLA regions, year on year in the second quarter of 2024. Group sales remained stable at EUR 3.7 billion (previous year: EUR 3.7 billion) due to the fact that selling price levels were lower for demand-related reasons. EBITDA at Group level fell by 16.9 percent to EUR 320 million (previous year: EUR 385 million), corresponding to the middle of the previously forecast range of between EUR 270 million and EUR 370 million. Lower raw material prices only partially offset the demand-related decline in average sales prices. Net loss in the second quarter of 2024 was EUR 72 million (previous year: net income of EUR 46 million), while the free operating cash flow (FOCF) was
EUR –147 million (previous year: EUR –10 million).
“The market environment remains very challenging,” says Dr. Markus Steilemann, CEO of Covestro. “Our sharp rise in volumes sold shows that we’re prepared for the market recovery. In addition, our transformation program STRONG is creating the necessary conditions for us to further expand our leading position in the global market and secure our competitiveness.”
In view of a rapidly changing market environment, Covestro launched the global transformation program STRONG in June 2024. The Group is therefore making itself even more effective and efficient and is systematically driving its digitalization. As part of STRONG, Covestro is planning to realize global annual savings in material and personnel costs of EUR 400 million by 2028, of which EUR 190 million will be in Germany.
Full-year 2024: Earnings guidance narrowed
Covestro continues to expect challenging economic conditions in the remainder of the year. Covestro has therefore narrowed its guidance for EBITDA and ROCE above WACC and adjusted its forecast for the free operating cash flow for fiscal 2024. The company now anticipates EBITDA between EUR 1 billion and EUR 1.4 billion (previously: between EUR 1 billion and EUR 1.6 billion). Covestro now expects a free operating cash flow of between EUR –100 million and Covestro increased its volumes sold, in particular in the APAC and EMLA regions, year on year in the second quarter of 2024. Group sales remained stable at EUR 3.7 billion (previous year: EUR 3.7 billion) due to the fact that selling price levels were lower for demand-related reasons. EBITDA at Group level fell by 16.9 percent to EUR 320 million (previous year: EUR 385 million), corresponding to the middle of the previously forecast range of between EUR 270 million and EUR 370 million. Lower raw material prices only partially offset the demand-related decline in average sales prices. Net loss in the second quarter of 2024 was EUR 72 million (previous year: net income of EUR 46 million), while the free operating cash flow (FOCF) was
EUR –147 million (previous year: EUR –10 million).
“The market environment remains very challenging,” says Dr. Markus Steilemann, CEO of Covestro. “Our sharp rise in volumes sold shows that we’re prepared for the market recovery. In addition, our transformation program STRONG is creating the necessary conditions for us to further expand our leading position in the global market and secure our competitiveness.”
In view of a rapidly changing market environment, Covestro launched the global transformation program STRONG in June 2024. The Group is therefore making itself even more effective and efficient and is systematically driving its digitalization. As part of STRONG, Covestro is planning to realize global annual savings in material and personnel costs of EUR 400 million by 2028, of which EUR 190 million will be in Germany.
Full-year 2024: Earnings guidance narrowed
Covestro continues to expect challenging economic conditions in the remainder of the year. Covestro has therefore narrowed its guidance for EBITDA and ROCE above WACC and adjusted its forecast for the free operating cash flow for fiscal 2024. The company now anticipates EBITDA between EUR 1 billion and EUR 1.4 billion (previously: between EUR 1 billion and EUR 1.6 billion). Covestro now expects a free operating cash flow of between EUR –100 million and
EUR 100 million (previously: between EUR 0 million and EUR 300 million). For ROCE above WACC, Covestro now anticipates a range between –7.0 percentage points and –4.0 percentage points (previously: between –7.0 percentage points and –2.0 percentage points). Covestro projects that GHG emissions measured as CO2 equivalents will still be between 4.4 million metric tons and 5.0 million metric tons. The Group anticipates EBITDA for the third quarter of 2024 will be EUR 250 million to EUR 350 million.
“We were able to keep our sales stable in the second quarter and reached the middle of our EBITDA guidance. That’s positive news and proof of our resilience,” says Christian Baier, CFO of Covestro. “In view of the continuing challenging economic environment, we have narrowed our earnings guidance for the year as a whole accordingly.”
Confirmatory due diligence with ADNOC has started
Based on the open-ended talks held up to then with the Abu Dhabi National Oil Company (ADNOC), the Board of Management of Covestro resolved in June 2024 to enter into concrete negotiations about a possible transaction and the possible conclusion of an investment agreement and to enable an adequate exchange of corporate information to confirm assumptions (confirmatory due diligence). The starting point for the negotiations is a potential offer price of EUR 62 per Covestro share indicated to Covestro by ADNOC, which is subject to, among other things, the results of the confirmatory due diligence as well as agreement on the content of an investment agreement.
Covestro systematically advances its aim to become fully circular
In May 2024, Covestro announced its authorization as a waste trader at IFAT, the world’s leading trade fair for the waste and disposal industry. The Group has created the legal conditions to become a purchaser and recycler of plastic waste itself, thereby securing independent access to the valuable resource of waste. Covestro has secured further access to recycled materials through a partnership announced in June 2024 with Neste and Borealis to enable the recycling of discarded tires into high-quality plastics for automotive applications.
With the aim of continuously enhancing chemical recycling, Covestro also invested a mid single-digit million euro amount in the Dutch company BioBTX in June 2024. With this partnership, Covestro is enabling construction of the world’s first demonstration plant for an innovative technology that makes it possible to produce valuable chemicals such as benzene, toluene and xylene from organic and mixed plastic waste and then use them in plastics production.
Increase in volumes sold in both segments
In the Performance Materials segment, Covestro significantly increased volumes sold despite the difficult market situation in the second quarter of 2024, in particular in the EMLA and APAC regions. Sales thus have increased year on year by 2.5 percent to EUR 1.83 billion (previous year: EUR 1.79 billion). At the same time, lower raw material prices only partially offset the demand-related decline in selling prices, with the result that EBITDA fell by 35.1 percent year on year to EUR 196 million (previous year: EUR 302 million). The free operating cash flow was EUR –89 million (previous year: EUR –77 million).
Covestro has also increased volumes sold in the Solutions & Specialties segment in the second quarter of 2024, especially in the APAC region. Again, this increase only partially offset the lower selling prices, meaning that sales declined by 3.3 percent year on year to EUR 1.81 billion (previous year: EUR 1.88 billion). EBITDA fell by 21.3 percent to EUR 174 million (previous year: EUR 221 million). This decline is attributable in particular to a non-recurring positive effect from the sale of the additive manufacturing business in the second quarter of 2023, which had increased earnings by EUR 35 million. In addition, expenses in connection with implementation of the transformation program STRONG had a negative impact in the low double-digit million euro range in the second quarter of 2024. The free operating cash flow in the past quarter was EUR 36 million (previous year: EUR 150 million), with the fall being the consequence of higher funds tied up in working capital and a decline in EBITDA.
Covestro increased its volumes sold, in particular in the APAC and EMLA regions, year on year in the second quarter of 2024. Group sales remained stable at EUR 3.7 billion (previous year: EUR 3.7 billion) due to the fact that selling price levels were lower for demand-related reasons. EBITDA at Group level fell by 16.9 percent to EUR 320 million (previous year: EUR 385 million), corresponding to the middle of the previously forecast range of between EUR 270 million and EUR 370 million. Lower raw material prices only partially offset the demand-related decline in average sales prices. Net loss in the second quarter of 2024 was EUR 72 million (previous year: net income of EUR 46 million), while the free operating cash flow (FOCF) was
EUR –147 million (previous year: EUR –10 million).
“The market environment remains very challenging,” says Dr. Markus Steilemann, CEO of Covestro. “Our sharp rise in volumes sold shows that we’re prepared for the market recovery. In addition, our transformation program STRONG is creating the necessary conditions for us to further expand our leading position in the global market and secure our competitiveness.”
In view of a rapidly changing market environment, Covestro launched the global transformation program STRONG in June 2024. The Group is therefore making itself even more effective and efficient and is systematically driving its digitalization. As part of STRONG, Covestro is planning to realize global annual savings in material and personnel costs of EUR 400 million by 2028, of which EUR 190 million will be in Germany.
Full-year 2024: Earnings guidance narrowed
Covestro continues to expect challenging economic conditions in the remainder of the year. Covestro has therefore narrowed its guidance for EBITDA and ROCE above WACC and adjusted its forecast for the free operating cash flow for fiscal 2024. The company now anticipates EBITDA between EUR 1 billion and EUR 1.4 billion (previously: between EUR 1 billion and EUR 1.6 billion). Covestro now expects a free operating cash flow of between EUR –100 million and
EUR 100 million (previously: between EUR 0 million and EUR 300 million). For ROCE above WACC, Covestro now anticipates a range between –7.0 percentage points and –4.0 percentage points (previously: between –7.0 percentage points and –2.0 percentage points). Covestro projects that GHG emissions measured as CO2 equivalents will still be between 4.4 million metric tons and 5.0 million metric tons. The Group anticipates EBITDA for the third quarter of 2024 will be EUR 250 million to EUR 350 million.
“We were able to keep our sales stable in the second quarter and reached the middle of our EBITDA guidance. That’s positive news and proof of our resilience,” says Christian Baier, CFO of Covestro. “In view of the continuing challenging economic environment, we have narrowed our earnings guidance for the year as a whole accordingly.”
Confirmatory due diligence with ADNOC has started
Based on the open-ended talks held up to then with the Abu Dhabi National Oil Company (ADNOC), the Board of Management of Covestro resolved in June 2024 to enter into concrete negotiations about a possible transaction and the possible conclusion of an investment agreement and to enable an adequate exchange of corporate information to confirm assumptions (confirmatory due diligence). The starting point for the negotiations is a potential offer price of EUR 62 per Covestro share indicated to Covestro by ADNOC, which is subject to, among other things, the results of the confirmatory due diligence as well as agreement on the content of an investment agreement.
Covestro systematically advances its aim to become fully circular
In May 2024, Covestro announced its authorization as a waste trader at IFAT, the world’s leading trade fair for the waste and disposal industry. The Group has created the legal conditions to become a purchaser and recycler of plastic waste itself, thereby securing independent access to the valuable resource of waste. Covestro has secured further access to recycled materials through a partnership announced in June 2024 with Neste and Borealis to enable the recycling of discarded tires into high-quality plastics for automotive applications.
With the aim of continuously enhancing chemical recycling, Covestro also invested a mid single-digit million euro amount in the Dutch company BioBTX in June 2024. With this partnership, Covestro is enabling construction of the world’s first demonstration plant for an innovative technology that makes it possible to produce valuable chemicals such as benzene, toluene and xylene from organic and mixed plastic waste and then use them in plastics production.
Increase in volumes sold in both segments
In the Performance Materials segment, Covestro significantly increased volumes sold despite the difficult market situation in the second quarter of 2024, in particular in the EMLA and APAC regions. Sales thus have increased year on year by 2.5 percent to EUR 1.83 billion (previous year: EUR 1.79 billion). At the same time, lower raw material prices only partially offset the demand-related decline in selling prices, with the result that EBITDA fell by 35.1 percent year on year to EUR 196 million (previous year: EUR 302 million). The free operating cash flow was EUR –89 million (previous year: EUR –77 million).
Covestro has also increased volumes sold in the Solutions & Specialties segment in the second quarter of 2024, especially in the APAC region. Again, this increase only partially offset the lower selling prices, meaning that sales declined by 3.3 percent year on year to EUR 1.81 billion (previous year: EUR 1.88 billion). EBITDA fell by 21.3 percent to EUR 174 million (previous year: EUR 221 million). This decline is attributable in particular to a non-recurring positive effect from the sale of the additive manufacturing business in the second quarter of 2023, which had increased earnings by EUR 35 million. In addition, expenses in connection with implementation of the transformation program STRONG had a negative impact in the low double-digit million euro range in the second quarter of 2024. The free operating cash flow in the past quarter was EUR 36 million (previous year: EUR 150 million), with the fall being the consequence of higher funds tied up in working capital and a decline in EBITDA.
First half of the year impacted overall by low sales prices
Group sales in the first half of the current fiscal year 2024 declined by 3.5 percent to EUR 7.2 billion (previous year: EUR 7.5 billion). The Group’s EBITDA fell by 11.6 percent to EUR 593 million in the first half of the year compared to the first six months of 2023 (previous year: EUR 671 million). The free operating cash flow in the first half of the year was at EUR –276 million (previous year: EUR –149 million), while net loss fell to EUR 107 million (previous year: net income of EUR 20 million).