Strong first quarter for Covestro

After a successful fiscal year 2016, materials manufacturer Covestro continued to perform well in the first quarter of 2017 and adjusted its forecast upward for the full year.

Leverkusen is the oldest of Covestro’s sites. Source: Covestro -

Thanks to still-strong demand for innovative polymers, the Group’s core volumes increased by 9.0%. Further growth in production capacity utilization and the associated improvement in margins enabled the company to again boost EBITDA. At EUR 846 million, EBITDA was up 66.5% on the prior-year period. Net income rose by 157.1% to EUR 468 million. In the first quarter of the previous year, this figure had totaled EUR 182 million.

Mastering the challenges

“The high demand for our products indicates that innovative plastics play an important role in mastering the challenges posed by global megatrends such as urbanization, climate change, or the evolution of mobility. The proof is our strong volume growth and resulting improved earnings in all segments,” says Covestro CEO Patrick Thomas. “We continue our positive momentum and deliver an EBITDA improvement year-on-year for the ninth consecutive quarter.”

Company adjusts forecast

Based on the first quarter’s positive business performance, the company has adjusted the forecast given in the 2016 Annual Report for the full year 2017. Covestro still expects core volume growth in the low-to-mid-single-digit percentage range. The company now anticipates free operating cash flow significantly above the average of the last three years (previously: slightly above the average of the last three years). Furthermore, Covestro now expects return on capital employed (ROCE) to significantly exceed the 2016 level (previously: slightly above the 2016 level).

Sales and cash flow higher

The robust core volume growth and 13.4% overall selling price increase – especially in the Polyurethanes segment, where prices were up 25.8% over the prior-year quarter – resulted in sales growth of 24.7% to EUR 3,586 million. Free operating cash flow also saw a positive trajectory. This figure amounted to EUR 211 million and was up 174% over the same period the previous year due to improved operating cash flow.

Three core markets

“Our optimism for fiscal year 2017 was confirmed in the first quarter,” states CFO Frank H. Lutz. “Our figures prove that we are in the position to benefit from the growth in our customer industries while at the same time improving operating efficiency. In addition, our strategy to build a strong global footprint increasingly pays off. Sales and profitability in our three core markets China, Germany and the US are more and more balanced.”

Volumes growth in the segments

In the first quarter, core volumes in the Polyurethanes segment rose substantially, by 6.8% year-on-year. All product groups, particularly MDI and TDI, contributed to this increase. The key driver here was greater demand from the global construction sector as well as from furniture and mattress industry in the NAFTA and APAC regions. At EUR 482 million, EBITDA more than doubled year-on-year. This was mainly due to higher margins.

Core volumes in the Coatings, Adhesives, Specialties segment increased by 8.1% as against the prior-year quarter. Significant volume growth was reported particularly by the APAC and EMLA regions. At EUR 146 million in the first quarter, EBITDA was up 5.0% on the previous year. Last year, Covestro commissioned a world-scale plant for raw materials for coatings in China. In contrast to the other two segments, prices of Coatings, Adhesives, Specialties on average remained at the previous year’s level.

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