German materials supplier Covestro has reported a sharp rise in year-on-year earnings and sales in the second quarter of 2017, thanks to increasing demand for polymer materials.
In the three months to 30 June, group sales were up 17 percent at 3.5 billion euros, while core volumes were down by over 1 percent, the company announced July 25.
Higher utilization rates and “robust demand” also helped the Leverkusen, Germany-based company to increase earnings (EBITDA) by 56.5 percent to 848 million euros in the second quarter.
Net income more than doubled with a 110.4 percent growth to 484 million euros during the period.
“In the next five years, we anticipate generating a cumulative total of 5 billion euros in free operating cash flow,” said CEO and interim CFO Patrick Thomas.
The cash, he added, will be used for bolt-on acquisitions in the specialties segment, if the opportunity arises.
Referring to the ongoing demand for its products, chief commercial officer Markus Steilemann said Covestro would further invest in its production plants and removing bottlenecks in the polyurethanes and polycarbonates segments.
While core volumes in the polyurethanes segment were down 2.3 percent year-on-year in the second quarter, the segment's earnings grew by 143.9 percent over the prior-year quarter to 556 million euros, largely due to improved margins.
The decline in volumes was attributable primarily to the polyether polyols product group and constrained product availability in the MDI and TDI product groups.
To meet the high demand Covestro announced in March that it would continue production of the rigid foam precursor MDI in Tarragona, Spain, for the time being. The company is also doubling its MDI capacity at its Brunsbüttel plant in northern Germany to around 400,000 tonnes per year by the end of 2018.
The polycarbonates segment recorded modest growth in core volumes of 0.7 percent compared with the prior-year quarter.
While growth was weaker compared to the previous quarter, due to constrained volumes available in Europe, Covestro benefited from its capacity expansion at the Shanghai site, which came on stream late 2016.
The segment's earnings rose by 3.1 percent to 197 million euros.
Covestro has already announced further expansion at its Shanghai plant to address growing demand, particularly in the APAC region. The expansion will be completed in 2019.
Core volumes in the Coatings, Adhesives, Specialities segment decreased by 3 percent from the prior-year quarter, mainly as a result of volume shifts in the first six months.
Earnings in the segment was down 19.7 percent at 114 million euros compared to the same period the previous year.
For the first half results, Covestro said in the first six months of the year sales grew 20.8 percent on a 14.4 percent total increase in selling prices to 7 billion euros. First half earnings were up 61.3 percent at 1.7 billion euros, primarily driven by earnings growth in polyurethanes. Free operating cash flow also increased significantly by 68.8 percent to 530 million euros.