Third quarter 2017: Covestro raises bar and announces share buyback

Materials manufacturer Covestro delivered the strongest quarter in the company’s history in the third quarter of 2017 as the positive trend of the first six months carried on.

Third quarter 2017: Covestro raises bar and announces share buyback. Source: Covestro -

At EUR491 million, net income was up 89.6% on the prior-year quarter. At the same time, EBITDA was 50.2% higher, and sales rose 16.9% over the same period the previous year. Core volumes increased 2.6%.

Ongoing robust demand

The boost in sales was primarily due to higher selling prices, mainly in the Polyurethanes segment, with a positive effect of 18.4%. FOCF amounted to EUR658 million, up 1.9% over the prior-year quarter. Based on these strong results, Covestro decided to review its announced target to deliver EUR5 billion of cumulative FOCF until year-end 2021. However, on Group level, the company reiterates its guidance for the full year 2017. This outstanding performance is attributable to the ongoing robust demand in the company’s main customer industries and positive margin performance.

Share buyback of up to EUR1.5 billion

“The extraordinary cash generation provides us, earlier than originally expected, with the opportunity to return significant amounts of cash to our shareholders while preserving the ability to consider bolt-on acquisition opportunities,” says CEO Patrick Thomas. “Therefore we decided to start a share buyback for either up to EUR 1.5 billion or up to 10% of the outstanding stock capital without further delay.”

Polyurethanes highly profitable

In the third quarter, core volumes in the Polyurethanes segment were up 4.3% over the same quarter of the previous year. The TDI product group above all contributed to this development. The segment’s EBITDA more than doubled to EUR 556 million from the prior-year quarter, a development largely due to higher margins as a result of a generally positive supply and demand situation. In the course of doubling MDI capacity at its Brunsbüttel facility in northern Germany to around 400,000 metric tons per year by the end of 2018, the company already held a topping-out ceremony to celebrate the completion of shell construction at the plant.

Challenging competitive environment

Core volumes in the Coatings, Adhesives, Specialties segment decreased by 5.0% from the prior-year quarter due to a challenging competitive environment. At EUR119 million in the second quarter, EBITDA was 12.5% below the previous year’s figure. The Group pushes boundaries to continually update its product range: Recently, a solar-powered car designed by students at RWTH Aachen University participated in the nearly 3,000-kilometer World Solar Challenge through the Australian desert, protected by Covestro coatings.

Positive first nine months of 2017

Covestro showed an excellent performance in the first three quarters of 2017. Core volumes rose by 3.2% over the prior-year period due to continued healthy demand. Sales jumped 19.5% to EUR10.6 billion, and EBITDA increased by 57.4% to EUR2.6 billion. FOCF also grew significantly, by 23.8% to EUR1.2 billion. Thanks to the control termination agreement reached with Bayer AG in September, Covestro has taken a further step toward complete independence.

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