One day after announcing it has entered into "concrete negotiations" for acquisition by Abu Dhabi National Oil Co. (ADNOC), Covestro said it wants to save 400 million euros ($427 million) in material and personnel costs globally by 2028.
Germany will be the most affected market, with 190 million euros ($202 million) of cost saving measures planned for Covestro’s home country.
The plans were announced as part of a new "global transformation program" called Strong. It aims to make the company more efficient and drive digitalization forward amid a "rapidly changing market environment." Covestro said doing so requires "making production, administrative units and other areas as efficient as possible and continuously expanding the innovation pipeline."
“Right now, our four focus areas remain central to our success, namely reliable production, better plant utilization, full customer focus on high-margin demand and a high level of cost awareness,” said Christian Baier, chief financial officer. “Strong will help us to unleash the full potential of our company and to further strengthen our competitiveness.”
Last September, Covestro announced it would centralize its Europe, Middle East, and Africa business at its headquarters in Leverkusen, Germany. It closed down its Swiss sales office during the 2024 fiscal year.
Covestro is a global supplier of polycarbonate resins and films, thermoplastic PU, PU materials and foams, and other specialty chemicals and materials. The firm posted losses of 124 million euros ($132 million) in its 2023 fiscal year, compared with 316 million euros ($337 million) in the previous year.
Like with many other producers, its margins have been under pressure from a combination of weak demand and price pressure from low-cost imports.
“The last few years have been challenging for the chemical industry and for Covestro,” said CEO Markus Steilemann. “Despite all the challenges, we have continued to drive forward our 'Sustainable Future' strategy. With Strong, we are systematically continuing our transformation, making the company even more efficient and accelerating digitalization. I am convinced that Strong will not only help to secure Covestro's leading position in the global market on the basis of competitive structures and processes and an impressive innovation pipeline, but also to expand it.”
Earlier this year, Covestro released plans to cut its Scope 3 carbon emissions by 2050. Officials said that reduction will require a transformation of the firm's entire supply chain.
The cost saving announcement comes as ADNOC’s most recent offer price for Covestro hit $14.4. billion and is more than 23 percent higher than Covestro's opening per-share price on June 24. Previous ADNOC offers for Covestro had been estimated at $11 billion and $12 billion.