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Higher selling price pushes Covestro's Q2 sales up 83.5%
Source:Adsale Plastics Network    Editor:JK    Date:09.Aug.2021

In the second quarter of 2021, Covestro benefited from a continued strong recovery in global demand compared to a weak Q2 2020 as a result of the COVID-19 pandemic. The Resins & Functional Materials (RFM) business acquired from DSM effective 1 April was also consolidated for the first time. As a result, the Group increased its core volumes sold by 35% year-on-year, of which around 10 percentage points is attributable to initial consolidation of the RFM business.


At the same time, unplanned weather-related production outages in the North America (NA) region and continued raw material bottlenecks have had a negative impact on product availability – also constraining the growth potential of all segments in the second quarter of 2021. Apart from the volume growth, substantially higher selling prices resulted in an 83.5% year-on-year increase in sales of over EUR 3.9 billion.


As a result of the volume growth and the overall increase in margins, EBITDA rose to EUR 817 million (previous year: EUR 125 million). This result also includes negative one-time effects of EUR 35 million in connection with the consolidation of RFM. Net income in the second quarter of 2021 was EUR 449 million (previous year: EUR –52 million), and the free operating cash flow (FOCF) increased significantly to EUR 374 million (previous year: EUR 24 million).


Increased earnings guidance for full year confirmed


Given the positive business performance, Covestro had already raised its outlook for earnings in 2021 as of 12 July. The company confirms this guidance today. The Group anticipates EBITDA will be EUR 2.7 billion to EUR 3.1 billion on the back of an improved outlook for margins in the second half of the year.


The FOCF is expected to be between EUR 1.6 billion and 2.0 billion and the return on capital employed (ROCE) between 16 and 20%. Core volume growth is expected – unchanged – to be between 10 and 15%, of which around 6 percentage points is attributable to the RFM business.


Growth in volumes and sales in all segments


In the second quarter of 2021, the Polyurethanes segment saw core volumes sold grow by 27.8% compared with the prior-year quarter. Volumes sold increased in all main customer industries across all regions. The segment’s sales amounting to around EUR 1.8 billion more than doubled compared with the prior-year quarter (EUR 913 million).


That is mainly attributable to an increase in average selling prices and in total volumes sold. Along with higher margins, this led to a strong increase in EBITDA to EUR 452 million (previous year: EUR –24 million).


In the Polycarbonates segment, core volumes sold rose in the second quarter of 2021 by 15.4% over the prior-year quarter. This change is mainly due to growth in volumes sold in the automotive and transportation industry observed across all regions.


Higher total volumes sold and selling prices meant sales rose by 56.6% to around EUR 1.0 billion (previous year: EUR 648 million). Substantially improved margins and growth in total volumes sold increased EBITDA to EUR 260 million (previous year: EUR 96 million).


Core volumes sold in the Coatings, Adhesives, Specialties segment rose 133.5% from the figure in the prior-year quarter. Around 100 percentage points is attributable to the initial consolidation of the RFM business.


This portfolio change, together with the increase in volumes and higher selling prices, resulted in sales of EUR 926 million (previous year: EUR 443 million). Consequently, EBITDA more than doubled year on year, rising to EUR 134 million (previous year: EUR 60 million).


First half of 2021: recovery in demand


A substantial recovery in demand for all main customer industries resulted in an 18.9% increase in core volumes sold in the first half of 2021. Higher selling prices, an increase in total volumes sold, and the change in portfolio resulted in sales in the first half of the year increasing by 47.1% to around EUR 7.3 billion.


In particular, a significant increase in selling prices, which more than compensated for higher raw material prices, resulted in a Group EBITDA of around EUR 1.6 billion (previous year: EUR 379 million).



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