Düsseldorf, Germany — Despite declining sales and a net profit that was cut in half during the fourth quarter of 2019, German chemical giant Covestro AG still hit its targets according to CEO Markus Steilemann.
"We have a solid financial base," he said, speaking at the annual financial news conference in Düsseldorf on Feb. 19.
Fourth quarter net profit fell 53.2 percent to 37 million euros ($40 million) from last year's 79 million euros ($85.4 million). EBITDA was 278 million euros ($300.7 million), down 5.1 percent from 293 million euros ($316.9 million) last year. Group sales fell by 15.1 percent to approximately 12.4 billion euros ($13.4 billion), as selling prices remained low due to increased competitive pressure in all segments. Core volumes, however, were up 3.8 percent.
"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," Steilemann said.
2020, he continued, will remain challenging, with anticipated low single-digit percentage growth in core volumes. The company has accelerated the implementation of a multi-year effectiveness and efficiency program launched in October 2018, to improve its expectations.
In addition, it is putting a number of short-term measures in place, such as more efficient cost management and another review of all existing and planned investments.
"We still see long-term demand for high-tech plastics to enable a more sustainable development across a wide range of different key technologies," Steilemann said.
For Covestro, he added, "the focus on sustainability will provide long-term growth," emphasizing that "Covestro has a clear commitment to thinking in circular system."
In the 2019 fiscal year, Covestro launched a global strategic program to implement the 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 partnerships and new business models. This program, Steilemann said, is for "decades" to come.
"We are consistently gearing our business towards circular economy," he said. "Circularity is our North Star." This has led, for example, to the company's move in December to sign a 10-year contract to buy 100 megawatts of power from an offshore wind farm company, Ørsted. That represents the largest corporate power purchase agreement to date in the sector, the company said.
Covestro is also taking part in the Europe-wide research project PUReSmart and is collaborating with Recticel to develop more sustainable mattresses, particularly through new raw material technologies and putting in place circular end-of-life solutions, to ensuring the mattresses remain in the plastics loop. The company will continue to collaborate with partners in this area.
In the long term, Covestro will "renounce" the use of oil in the production of its products and switch to renewable sources, he said.
"That includes our work on the use of CO2 as a feedstock as well as our looking at biobased alternatives," Steilmann said.
Steilemann did not state specific goals or numbers for its sustainability approach, saying it was too early for that.
"We are focusing on getting going, and are still at the very beginning. We want this to be something the entire organization is involved in, across the board," he said. "More research is needed as we examine the overall system in each case. It may take longer this way, but we are taking steady steps. We want to get to the summit but are still finding our way there."