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Covestro's key financial figures in 2018.
Covestro's key financial figures in 2018.

Covestro generated strong results in 2018 while challenges mounted throughout the year. Core volumes increased 1.6%, and Group sales rose by 3.4% to €14.6 billion.

After a weaker fourth quarter, Covestro could not achieve earnings at the previous year’s levels, which were marked by an outstanding positive business environment. Despite the decline of selling prices coupled with declining margins in the second six months, Covestro generated EBITDA of €3.2 billion, 6.8% below the record year of 2017.

Demand for our high-tech materials remains intact. That is a strong foundation for our profitable growth in the long term, especially in an increasingly challenging market environment,” explained CEO Dr. Markus Steilemann. “We have launched important strategic initiatives in 2018 to actively promote this growth path. These include investments in specific business segments with above-average demand potential and a stronger focus on efficiency.”

Volume growth in all segments

The Polyurethanes segment recorded stable performance in core volumes sold in 2018 with modest growth of 0.8%. Compared with 2017, EBITDA decreased by 19.1% to €1,763 million. Although greater total volumes and higher average selling prices on average improved earnings in the full year, these increases could not offset the negative effects of increasingly intense competition, particularly in the fourth quarter of 2018. 

Core volumes in Polycarbonates rose by 3.0%. EBITDA increased by 21.5% to €1,036 million. An overall positive margins trend and greater total volumes lifted earnings, as did the proceeds from the sale of the U.S. sheet business. Over the course of the fourth quarter of 2018, earnings were burdened by an increasingly challenging competitive environment.

Core volumes in the Coatings, Adhesives, Specialties segment expanded by 2.5%. Higher raw material prices and negative currency effects put downward pressure on EBITDA, which dropped by 4.5% to €464 million.

More intense competition and exceptional expenses in Q4

In the fourth quarter of 2018, Covestro saw volume growth of 1.7%. At the same time, the market environment became significantly more challenging. Group sales slid 7.1%.

Apart from intensified competition, non-recurring effects such as higher logistics costs as a result of the low level of the Rhine River and expenses related to the efficiency program underway had a negative effect. EBITDA therefore decreased by 66.7% to €293 million.

Outlook

Covestro anticipated core volume growth in the low to mid-single-digit percentage range for 2019 as a whole. Due to the increased competitive pressure, Covestro expected EBITDA between €1.5 and 2.0 billion. In the first quarter of 2019, EBITDA is anticipated to be around €440 million.

Dr. Thomas Toepfer, CFO of Covestro, commented: “For 2019, we expect demand to continue to grow, however margins will drop significantly due to competitive pressure.”

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