Lower Selling Prices Drive Covestro Sales Down 16% in 2019 First Quarter
Covestro reports that these results are in the expected range, and the company has confirmed the targets set for the year as a whole.
Covestro recently announced that higher competitive pressure influenced its first quarter 2019 results. Despite an overall solid demand, core volumes decreased slightly (down 1.8%), mainly due to lower volumes in the Polycarbonates segment. A marked drop in selling prices led to a reduction in group sales by 16% to €3.2 billion (approximately $3.6 billion). Covestro reports that these results are in the expected range, and the company has confirmed the targets set for the year as a whole.
“The first quarter was in line with our guidance and confirms our subdued expectations for the full year,” said Markus Steilemann, Ph.D., CEO. “It is therefore even more important to now set the right course for our future growth with investments and efforts to improve efficiency. After all, demand for our innovative and sustainable materials remains intact.”
In the Coatings, Adhesives, Specialties segment, core volumes reportedly saw virtually no change compared to the 2018 first quarter (down 0.1%). Sales in this segment increased by 5.9% to €627 million (~ $703.6 million), boosted by increased selling prices on average and exchange rate movements.
According to Covestro, core volumes in its Polyurethanes segment remained largely stable (down 0.2%) in the first quarter of 2019. Sales in this segment declined by 24.3% to €1.5 billion (~ $1.7 billion) due to lower selling prices, with all three regions posting lower sales.
“The prior-year quarter was influenced by exceptionally high margins in a number of product groups,” said Thomas Toepfer, Ph.D., chief financial officer. “In line with our expectations, our results therefore fell below those of the same period of last year. In anticipation of continued challenging environment influencing results throughout the year, we are especially focusing on efficient production and processes and targeted investments.”
Toward that end, Covestro raised its stake to 80% in the DIC Covestro Polymer joint venture in Japan, effective April 1, expanding its global thermoplastic polyurethanes business. Covestro plans total investments of over €900 million (~ $1 billion) this year to refurbish and expand its production plants and extend into growth areas such as specialty films. Efficiency measures are expected to deliver cost savings of €350 million (~ $392.8 million) per year over the medium term.
According to Covestro, strategic initiatives to advance digitalization and innovation made progress in the first quarter. The new Asellion digital B2B trading platform was successfully launched at the end of March, enabling Covestro customers to order products online and do business around the clock.
Covestro has also joined forces with U.S.-based biotechnology company Genomatica to research and develop high-performance materials on the basis of renewable raw materials. This collaboration aims to reduce the use of fossil-based resources such as crude oil through the use of sustainable raw materials.
Additional details are available at www.covestro.com.