News for the plastics and rubber industry. Macplas
Materials Wednesday, 6 May 2020

Covestro meets guidance for 2020 first quarter

Covestro has met its Ebitda guidance for the first quarter of 2020 in a business environment strongly impacted by the coronavirus. Core volumes decreased by 4.1% compared to the prior-year quarter. This is mainly the result of significantly weaker demand in China due to coronavirus-related interruptions of production at local customers in February and March 2020. Coupled with a worldwide decline in selling prices, mainly driven by increased competitive pressure in the Polyurethanes and Polycarbonates segments, this led to lower Group sales of around 2.8 billion euros (-12.3%). Ebitda stood at 254 million euros (-42.5%), which was in the expected range for the first quarter. Net income declined to 20 million euros (-88.8%). At minus 249 million euros, free operating cash flow (FOCF) was in negative territory, as expected.


For fiscal year 2020, Covestro anticipates core volume growth below the previous year. FOCF is expected to total between minus 200 million euros and 300 million euros, with return on capital employed (ROCE) amounting to between minus 1% and 4%. Ebitda is projected at between 700 million and 1.2 billion euros. In addition to the existing efficiency and effectiveness program launched in October 2018, Covestro increased the target for additional short-term cost savings by another 100 million to 300 million euros for the current fiscal year. Current investments are being reduced by around 200 million euros bringing total investments to some 700 million euros.


In the first quarter of 2020, Covestro’s business in all segments was affected by the significant impact of the coronavirus pandemic, particularly in China. The Polyurethanes segment saw core volumes decline by 3.6% compared with the prior-year quarter during this period. This is mainly attributable to the downturn in volumes in the electrical, electronics and household appliances sector and the automotive industry. As a result of increased competition worldwide and the change in total volumes sold, sales were down to around 1.3 billion euros (-13.7%). Ebitda fell to 50 million euros (-68.2%) due to the decline in margins.


Core volumes in Polycarbonates declined by 4.9% from the prior-year quarter. This was due to considerably lower volumes sold in the electrical, electronics and automotive industry. A low level of selling prices and decreased volumes drove sales in the Polycarbonates segment down to 733 million euros (-14.8%). Lower margins caused Ebitda to decline to 109 million euros (-29.7%).


Core volumes in the Coatings, Adhesives, Specialties segment fell 5.2% compared to the prior-year quarter. This development was driven by weaker demand for coating precursors in all key customer industries, particularly the automotive industry. Sales were down 8.8% to 572 million euros due to a decline in total volumes sold and lower average selling prices. Ebitda fell to 130 million euros (-1%) due to negative volume effects and weaker margins. Lower costs enabled the Ebitda margin in the Coatings, Adhesives, Specialties segment to rise to 22.7% despite the effects of the coronavirus.