●Core business sales decreased by 22.7%
●Group sales amounted to about 2.2 billion euros (-32.9%)
●Realized EBITDA of 125 million euros
●Net profit was negative 52 million euros
> ●Free operating cash flow rose to 24 million euros
●Adhere to crisis management measures to ensure liquidity
●Accelerate the transition to a circular economy
Due to the further spread of the new crown pneumonia epidemic in Europe and North America, Science and Technology Xtron’s second-quarter results were severely impacted as expected. Due to the sharp drop in demand from major customer industries due to the epidemic, core business sales fell by 22.7% year-on-year from April to June, of which sales in April had the greatest impact, but have improved since mid-May. Group sales fell accordingly by 32.9 percent to approximately EUR 2.2 billion (prior year: EUR 3.2 billion). Due to the time lag in the impact of the epidemic on various regions, EMLA (Europe, Middle East, Africa, and Latin America excluding Mexico) and North America experienced a greater decline in sales during the reporting period than the Asia-Pacific region. The Group’s profit before interest, taxes, depreciation and amortization (EBITDA) in the second quarter was 125 million euros (-72.8%). This figure was announced through the performance forecast on July 9, 2020, which was higher than market expectations at the time. This is mainly due to the accelerated recovery of demand in June, especially in the polycarbonate segment. The Group’s net profit in the second quarter was negative EUR 52 million (Q2: EUR 189 million). In stark contrast to the decline in EBITDA, free operating cash flow (FOCF) rose to EUR 24 million (prior year: negative EUR 55 million) due to strict liquidity management measures.
“As expected, the global COVID-19 pandemic had a significant impact on our second quarter results,” said Dr. Markus Steilemann, CEO of Covestro. “We took the right measures in a timely manner. To protect our employees, maintain production and supply chains and ensure continued supply to our customers. We have done so successfully so far and will continue to steer Covestro firmly through this crisis.”
The company confirmed its revised full-year financial guidance in April this year. However, there is still a lot of uncertainty about the impact of the new crown epidemic on economic development.
Insist on crisis management and strengthen liquidity
Covestro continued to strengthen liquidity by taking further financing measures in the second quarter. On June 5, 2020, Covestro placed Eurobonds in the capital market with a total amount of 1 billion euros. The bonds will mature in February 2026 and June 2030, respectively, with coupon rates of 0.875% and 1.375%, respectively. Investor demand is extremely strong, oversubscribed more than 10 times.
“Although Covid-19 has had a significant impact on our performance, our continuous actions have paid off.” said Dr. Thomas Toepfer, Chief Financial Officer and Chief Employment Officer of Covestro, ” 2020 remains a special year in which we still cannot fully foresee how things will unfold. This is yet another reason why we remain focused on efficiency, cost awareness and securing liquidity, which is our clear path.”
In view of this exceptional situation, the Covestro Board of Directors, Supervisory Board and employees are also united to help strengthen the company’s resilience and resilience in the current environment through their respective contributions. For Covestro’s German companies, the board of directors and employee representatives have reached an agreement to reduce the working hours and corresponding salaries of all employees by the end of November 2020. All Covestro Group companies outside Germany implement similar cost-saving measures on a country-by-country basis.
New corporate vision: Accelerating the transition to a circular economy
In May 2020, Covestro proposed a new long-term and solutions in all areas in full compliance with the circular concept in the long term. The strategic plan, which was launched in 2019, aims to implement the circular economy concept in all areas of the company in a holistic manner. The plan is currently being implemented step by step and will be accompanied by specific and measurable goals. Its focus includes the four areas of Alternative Raw Materials, Innovative Recycling, Joint Solutions and Renewable Energy.
Affected by the new crown epidemic, sales of all business segments declined
Affected by the epidemic, the core business sales of the polyurethane business segment in the second quarter of 2020 fell sharply by 25.9% year-on-year ( Same period last year: up 0.7%), all of its major customer industries were also affected. Sales decreased by 38.7% to 913 million euros due to lower total volumes and lower average selling prices. EBITDA fell to negative EUR 24 million (prior year: EUR 172 million) due to lower volumes and lower margins.
In the second quarter of the polycarbonate business segment, the core business sales volume decreased by 14.4% year-on-year (the same period last year: an increase of 4.4%).�. The overall impact was moderated by a slower pace of decline in the electronics, electrical and appliances sector and higher sales in the construction sector, although a sharp drop in demand from the automotive and transport sectors led to lower sales. Sales in the segment fell to EUR 648 million (-27.8%) due to lower total volumes and average selling prices. EBITDA also fell by 37.7% to 96 million euros.
Core business sales in the Coatings, Adhesives and Specialty Chemicals business segment decreased by 25.3% year-on-year (prior year: -4.7%). The COVID-19 pandemic has led to a sharp weakening of demand from key customer industries, especially the automotive and transport industries. Sales in the segment fell by 28.7 percent to 443 million euros due to lower total volumes and average selling prices. EBITDA fell by 60.0% to EUR 60 million due to lower volumes and lower margins.
COVID-19 affects 1H 2020 results
As expected, COVID-19 has had a significant impact on 2020 1H results. In the first half of the year, core business sales fell by 13.6% year-on-year, and group sales fell by 22.7% to approximately 4.9 billion euros (the same period last year: 6.4 billion euros). This was mainly attributable to lower total sales volume and lower selling price levels. As a result, EBITDA fell by 57.9% to 379 million euros, while net profit was negative 32 million euros (the same period last year: 368 million euros). Free operating cash flow fell to negative EUR 225 million in the first half of 2020 (prior year: negative EUR 100 million).
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