Covestro has achieved its targets in a challenging market environment in fiscal 2019. Core volumes increased by 2.0% compared to the previous year. Group sales fell by 15.1% to approximately EUR 12.4 billion as selling prices remained low due to increased competitive pressure in all segments. Consequently, EBITDA declined in line with our forecast by 49.9% to approximately EUR 1.6 billion. Net income fell to EUR 552 million (–69.7%), while free operating cash flow (FOCF) came in at EUR 473 million (–71.7%). On this basis, Covestro plans to distribute a dividend at the previous year’s level of EUR 2.40 per share.
“2019 was marked by a number of geopolitical and macroeconomic uncertainties. Nevertheless, demand for our materials remains intact, which confirms our view that plastics are more valuable for the future than ever before,” said CEO Dr. Markus Steilemann. “2020 will remain challenging for us. However, we still see long-term demand for high-tech plastics to enable a more sustainable development across a wide range of different key technologies. Therefore, we are consistently gearing our business towards circular economy.”
In the 2019 fiscal year, Covestro launched a global strategic program to implement circular economy in all corporate divisions going forward. In particular, the company aims to use alternative raw materials, develop innovative recycling and establish broad-based cooperations and new business models.
Efficiency ensures ability to act
“Covestro has a solid financial base, even though the operating result for fiscal 2019 was, as expected, below the record levels of previous years due to continuing pressure on prices. Nevertheless, we still achieved our targets in this environment,” said CFO Dr. Thomas Toepfer. “We will only be successful in the current market environment if we position ourselves even more efficiently, prioritize projects and question investments in order to maintain the necessary financial flexibility.”
Given the continuing challenging economic outlook for 2020, Covestro has accelerated the implementation of the multi-year effectiveness and efficiency program launched in October 2018. That enabled Covestro to cut costs by around EUR 150 million in the past fiscal year. For 2020, the company aims to achieve savings of EUR 250 million, while the cumulated savings by the end of 2021 are expected to be around EUR 350 million annually. In addition, various short-term measures were taken, such as more efficient cost management and another review of all existing and planned investments. This should result in additional savings of EUR 200 million in the current financial year. In addition to the continuous improvement of the company’s commercial clout, the focus in 2020 will therefore remain on increasing efficiency.
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SOURCE: Covestro
