Covestro has released its third-quarter 2022 report. According to the report, Covestro’s business performance was strongly impacted by high energy and raw material prices in the face of the current European energy crisis. However, group sales grew 7.3%, compared with the third-quarter 2021, to €4.6 billion (previously: €4.3 billion) as a result of exchange rate movements and a considerably higher price level, especially in Europe. EBITDA fell by 65% to €302 million (previously: €862 million), meaning that Covestro met its EBITDA forecast for the third-quarter. Covestro said the main reasons for the decline in earnings were lower margins, since the group was able to offset the sharp rise in raw material and energy prices, only to a small extent, by a higher selling price level. The fall in total volumes sold also reduced earnings. The free operating cash flow (FOCF) fell by 91.3% to €33 million (previously: €381 million), in particular due to the lower cash flows from operating activities. Net income in the third-quarter was down by 97.5% to €12 million (previously: €472 million).

• Group sales rise to €4.6 billion (+7.3%)
• EBITDA of €302 million (–65.0%)
• Net income total €12 million (–97.5%)
• Free operating cash flow (FOCF) falls to €33 million (–91.3%)
• Full-year guidance for 2022 narrowed
• Further milestones on the path to a circular economy

"We will have to cope with this unprecedented environment for the time being. We’re therefore using all the levers available to us to steer Covestro through the current situation," said Markus Steilemann, Ph.D., CEO of Covestro. "In particular, the unparalleled price increases for fossil fuels show that Covestro’s strategic focus on becoming fully circular is the right path. Our products are vital in paving the way for a fossil-free future."

Full-Year Guidance for 2022 Narrowed

Covestro has narrowed the full-year guidance for 2022 that it issued on July 29, 2022, and now anticipates that EBITDA will be between €1.7 billion and €1.8 billion (previously: between €1.7 billion and €2.2 billion) and that the FOCF will be between €0 million and €100 million (previously: between €0 million and €500 million). Return on capital employed over the weighted average cost of capital is expected to be between -2% and -1% (previously: -2% and +2%). GHG emissions measured as CO2 equivalents are projected to be between 5 million metric tons and 5.4 million metric tons (previously: between 5.3 million metric tons and 5.8 million metric tons).

Increase in Sales in Both Segments

Sales in the Performance Materials segment in the third-quarter of 2022 rose by 6.6%, compared to the third-quarter of 2021, and were €2.3 billion (previously: €2.2 billion). According to Covestro, the reasons for that were exchange rate movements and a higher selling price level. In contrast, a drop in total volumes sold–driven primarily by a downturn in demand–had a negative effect. The segment’s EBITDA fell by 92.5% to €53 million (previously: €708 million). Covestro said this is mainly due to lower margins, since higher selling prices were able to offset the rise in raw material and energy prices, only to a small extent. FOCF fell by 64.0% to €93 million (previously: €258 million), in particular due to the decline in EBITDA.

Sales in the Solutions & Specialties segment in the third-quarter of 2022 rose by 6.1%, compared with the third-quarter of 2021, to €2.2 billion (previously: €2.1 billion), mainly due to exchange rate movements and a higher selling price level. In contrast, the total volumes sold–due in particular to a downturn in demand–had a negative effect. The segment’s EBITDA rose to €280 million, or by 26.7% compared to the third-quarter of 2021 (previously: €221 million). According to Covestro, one of the reasons for this was lower provisions for short-term variable compensation. Margins remained stable at the last year’s level since higher selling prices were able to offset the rise in raw material and energy prices. FOCF increased by 25.0% to €65 million (previously: €52 million) due to the higher EBITDA. 

High Price Level in the First Nine Months of 2022 

Group sales in the first nine months of 2022 increased by 21.1% to €14.0 billion (previously: €11.6 billion). According to Covestro, the main reasons for that were a high selling price level and exchange rate movements. The group’s EBITDA in the first three quarters of 2022 fell by 31.7% to €1.7 billion (previously: €2.4 billion), mainly due to lower margins. Covestro said this resulted from a considerable rise in raw material and energy prices, which could only be partly offset by a higher selling price level. Compared to the previous year, net income in the first nine months of 2022 fell by 52.3% to €627 million (previously: €1.3 billion). FOCF declined to €–412 million (previously: €1.1 billion). Covestro attributes this to a lower EBITDA and an increase in funds tied up in working capital, especially given the payment of short-term variable compensation for the successful fiscal year 2021.

For more information, visit: https://report.covestro.com/quarterly-statement-q3-2022/.