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All targets reached or exceeded: Covestro achieves record year

2017-02-21 15:18
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  • Core volumes up 7.5% year-on-year
  • Adjusted EBITDA rose by 22.7% to EUR 2.0 billion
  • Strong increase in Free Operating Cash Flow
  • Net income more than doubled
  • Proposed dividend of EUR 1.35 per share
  • Confident outlook for 2017

LEVERKUSEN, Germany, Feb. 21, 2017 /PRNewswire/ -- 2016 was a record year for materials manufacturer Covestro. Driven by demand for innovative materials, the Group's core volumes increased by 7.5%. With greater capacity utilization across its plants, adjusted EBITDA surged by 22.7% above the 2015 figure to EUR 2.0 billion. Net income more than doubled from EUR 343 million to EUR 795 million. On this basis, Covestro plans to pay its shareholders a dividend of EUR 1.35 per share.

From left to right: Board member responsible for innovation Dr. Markus Steilemann, CEO Patrick Thomas, CFO and labor director Frank H. Lutz and Dr. Klaus Schaefer, board member responsible for production and technology.
From left to right: Board member responsible for innovation Dr. Markus Steilemann, CEO Patrick Thomas, CFO and labor director Frank H. Lutz and Dr. Klaus Schaefer, board member responsible for production and technology.

 

CEO Patrick Thomas (left) and Frank H. Lutz, CFO and labor director proudly present Covestro’s 2016 annual report.
CEO Patrick Thomas (left) and Frank H. Lutz, CFO and labor director proudly present Covestro’s 2016 annual report.

"Our strategy is paying off. These excellent results underscore Covestro's fundamental strength," explains CEO Patrick Thomas. "Growing customer demand for our innovative and sustainable products shows that we are increasingly successful at replacing conventional materials with superior plastics."

Free Operating Cash Flow also increased sharply by 41.8% to EUR 1.4 billion. Covestro increased profitability as well: Return on Capital Employed (ROCE) reached 14.2%, exceeding the previous year significantly. In contrast, Covestro Group's sales were down slightly by 1.5% to EUR 11.9 billion, as a result of lower selling prices and FX effects.

Optimized production capacity matches growing demand

In 2016, core volume growth outpaced global gross domestic product (GDP) significantly, thereby emphasizing Covestro's strong strategic positioning alongside important trends in key customer industries. The company was able to consistently increase sales volumes and further improve utilization of existing production capacity. Covestro also began the expansion of its capacity in high-growth regions at an early stage in order to meet increasing demand. This is particularly true of the Asian market, where the company put a plant into operation producing raw materials for coatings (HDI) and doubling its polycarbonates capacity.

In Europe, the production platform is being further optimized. The expansion of production capacity for the rigid foam precursor MDI at the Brunsbüttel (Germany) site was initiated in June. Capacity will double to 400,000 metric tons per year by 2018. In addition, Covestro proved in 2016 that CO2 can be used as a raw material for market-ready products: at Dormagen (Germany) last year, the company put into operation the world's first industrial production facility to use CO2 as a raw material for flexible foam components.

Improved financial flexibility

Covestro repaid all outstanding loans from Bayer in the past fiscal year. In March, the company placed a first bond in the total amount of EUR 1.5 billion as part of a debt issuance program, facilitating the funds to repay the loans in full. By the end of 2016, net financial debt was EUR 1.5 billion, some EUR 700 million below the level of the previous year.

"The debt issuance program provides us with additional financial flexibility," says CFO Frank H. Lutz. "Along with our positive cash flow performance, we now have sufficient funds for financing investments on our own."

Strong demand for Polyurethanes and Polycarbonates

In 2016, Covestro's Polyurethanes segment achieved year-on-year core volume growth of 7.7%, driven by a strong increase in all product groups, particularly in the MDI product group, as well as a 41.2% rise in adjusted EBITDA to EUR 881 million. Demand was driven by key industries such as the automotive and construction sectors. In October, due to an unforeseen production outage at a supplier, Covestro was forced to operate the European production facilities for MDI and TDI at reduced capacity and therefore declared force majeure. This was lifted at the end of the year.

Core volume growth in Polycarbonates was 10.3% year-on-year. Once more, sales volumes increased sharply, particularly in the APAC and NAFTA regions. Adjusted EBITDA climbed 25.7% to EUR 704 million in the Polycarbonate segment. Demand from the electrical and electronics industry was among the main growth drivers.

In the Coatings, Adhesives, Specialties (CAS) segment, core volumes remained stable despite the expected contractual termination of trading activities. Adjusted EBITDA increased by 1.8% to EUR 500 million. Lower raw material prices had a positive effect on earnings. In addition, the trend towards higher-quality end products also pushed demand for CAS products.

High profitability in Q4 2016

Covestro's successful performance continued in the fourth quarter of 2016. From October to December, core volumes were up 4.8% compared to the same period in the previous year. Thanks to higher selling prices, Group sales rose by 7.8% to EUR 3.0 billion. Adjusted EBITDA jumped 52.3% to EUR 390 million. Net income of EUR 124 million was also well above the fourth quarter of 2015 (minus EUR 84 million). Free Operating Cash Flow rose slightly by 3.6% to EUR 407 million.

Further profitable growth envisaged

In 2017, Covestro will continue to work on developing innovative materials in line with the company's vision: 'To make the world a brighter place'. "With our clear focus on sustainable growth in line with global macro trends, we have established a strong position for profiting from long-term market developments. We therefore face 2017 with great confidence," states Patrick Thomas.

As a global company with operations in close proximity to its regional customers, Covestro also considers itself well positioned in an environment marked by geopolitical uncertainty and economic volatility. Based on current global economic and key customer industry forecasts, Covestro expects solid performance across key indicators in 2017. The company anticipates a low-to-mid single-digit percentage increase in core volume growth at Group level. Covestro projects Free Operating Cash Flow to be slightly above the average of the last three years and ROCE to be slightly above the 2016 level.

About Covestro:

With 2016 sales of EUR 11.9 billion, Covestro is among the world's largest polymer producers. Business activities are focused on the manufacture of high-tech polymer materials and the development of innovative solutions for products used in many areas of daily life. The main segments served are the automotive, electrical and electronics, construction and the sports and leisure industries. Covestro has 30 production sites around the globe and as of December 31, 2016, employed approximately 15,600 people.

Note to editors:

Below please find a table showing key data for Covestro AG for fiscal year 2016.

The annual report, press release, presentation, speeches and the audio recording of the conference are available for download from our website at https://press.covestro.com/news.nsf/ID/2017-APC. 

You can listen to a webcast of the conference at http://edge.media-server.com/m/p/7c2rvuw2/lan/en

Find more information at www.covestro.com.

lb (2017-012E)

Forward-looking statements

This press release may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro's public reports which are available on the Covestro website at www.covestro.com. Covestro assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

Key Data for the Fourth Quarter and Full Year 2016


Covestro Group

4th Quarter 2015

EUR million

4th Quarter 2016

EUR million

Change

in %

2015

EUR million

2016

EUR million

Change

in %







Core volume growth

+3.0%

+4.8%


+2.7%

+7.5%


Sales

2,798

3,017

+7.8

12,082

11,904

–1.5

Change in sales







Volume

+1.5%

+3.8%


+2.6%

+5.0%


Price

–12.4%

+4.6%


–7.7%

–5.2%


Currency

+4.8%

–0.6%


+7.8%

–1.3%


Portfolio

0.0%

0.0%


0.0%

0.0%


EBITDA

132

390

>100

1,419

2,014

41.9

Adjusted EBITDA

256

390

+52.3

1,641

2,014

22.7

EBIT

(80)

221

.

680

1,331

95.7

Adjusted EBIT

59

221

>200

942

1,331

41.3

Net income

(84)

124

.

343

795

>100

Free operating cash flow

393

407

+3.6

964

1,367

41.8

ROCE




9.5%

14.2%









Polyurethanes







Core volume growth

+4.6%

+2.5%


+1.8%

+7.7%


Sales

1,385

1,540

+11.2

6,088

5,927

–2.6

Change in sales







Volume

+2.7%

+0.3%


+2.1%

+5.2%


Price

–20.0%

+11.6%


–12.4%

–6.4%


Currency

+4.2%

–0.7%


+7.2%

–1.4%


Portfolio

0.0%

0.0%


0.0%

0.0%


EBITDA

(22)

176

.

487

881

80.9

Adjusted EBITDA

63

176

>100

624

881

41.2

EBIT

(157)

80

.

26

489

.

Adjusted EBIT

(55)

80

.

201

489

>100

Free operating cash flow

327

307

-6.1

654

631

–3.5








Polycarbonates







Core volume growth

+0.5%

+12.8%


+5.1%

+10.3%


Sales

759

833

+9.7

3,172

3,298

4.0

Change in sales







Volume

–0.3%

+13.2%


+4.6%

+10.0%


Price

–3.9%

–2.6%


–2.6%

–4.3%


Currency

+6.5%

–0.9%


+10.4%

–1.7%


Portfolio

0.0%

0.0%


0.0%

0.0%


EBITDA

122

142

+16.4

558

704

26.2

Adjusted EBITDA

123

142

+15.4

560

704

25.7

EBIT

70

93

+32.9

374

507

35.6

Adjusted EBIT

70

93

+32.9

376

507

34.8

Free operating cash flow

140

108

 –22.9

138

442

>200








Coatings, Adhesives, Specialties







Core volume growth

–0.2%

0.0%


+2.6%

–0.3%


Sales

477

481

+0.8

2,093

2,040

–2.5

Change in sales







Volume

0.0%

+2.4%


+2.1%

+0.6%


Price

–2.2%

–1.7%


–1.1%

–2.4%


Currency

+5.0%

+0.1%


+7.6%

–0.7%


Portfolio

0.0%

0.0%


0.0%

0.0%


EBITDA

83

83

0.0

484

500

3.3

Adjusted EBITDA

84

83

–1.2

491

500

1.8

EBIT

60

59

–1.7

397

411

3.5

Adjusted EBIT

60

59

–1.7

406

411

1.2

Free operating cash flow

117

90

–23.1

319

341

6.9















Source: Covestro

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