Sales up, earnings down at Covestro in 'challenging' economy

Sales at materials specialist Covestro were up 13 percent to 18 billion euros in 2022 vs. 15.9 billion euros in 2021.

Although that hit a record sales figure for the company, volumes were lower, with the record number boosted by a significant increase in selling prices.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was down by 48 percent to 1.6 billion euros, from 3.1 billion euros in 2021 as a result of high prices for both energy and raw materials, and a reduction in demand over the year. The company saw a net loss for the year of 272 million euros, its first. As a result, it will be making no dividend payments for the 2022 financial year.

Sales in the fourth quarter of 2022 had a particular impact on the overall figures for the year, falling by 8.6 percent to 4 billion euros, down from 2021’s 4.3 billion euros. EBITDA for the quarter plummeted from 663 million euros in the 2021 quarter to a loss of 38 million euros in the 2022 quarter.

Business performance was impacted by global challenges that had significant and perceptible effects.

“In particular, the sharp rise in energy and raw material prices during the year, especially in Europe, put a strain on the company,” it said. “This was compounded by continuing adverse effects caused by the coronavirus pandemic in China, high inflation and an overall slowdown in global economic growth.”

Looking at the two parts of the business, sales in the performance materials segment of 9.1 billion euros were up 11.7 percent from 2022’s 8.1 billion euros, largely driven by higher selling prices. The 63 percent drop in EBITDA to 951million euros was, for the most part, the result of slashed margins because of higher prices for both energy and raw materials, alongside a fall in sales volumes.

The headline performance in the solutions and specialties part of the business was better. Again, higher selling prices drove an increase in the headline sales figure, up by 13 percent to 8.6 billion euros, from 7.6 billion euros in 2021. EBITDA here increased by 9.9 percent, from 751 million euros to 825 million euros. This was attributed to the rapid integration of the resins and functional materials business it acquired from DSM in April 2021. “Lower non-recurring expenses and higher synergy effects had a positive impact on earnings,” the company said.

“2022 was a year of polycrisis with unprecedented challenges for Covestro,” said CEO Markus Steilemann. “That is reflected in our results for the fiscal year. The action we took last year was all the more resolute: We reduced our energy consumption, cut costs and worked on further developing our products.”

He also highlighted its efforts towards achieving its vision of a circular economy, alongside its “Sustainable Future” strategy. “We are continuously gearing our product portfolio towards sustainable growth markets such as wind energy or electromobility, and serving the increasing demand for circular solutions,” he said. “One thing is clear, our contribution is essential for a sustainable future.”

The company said that economic conditions “remain challenging” for 2023. It anticipates EBITDA for both the company as a whole and its performance materials business will be “well below” the previous year, while for solutions and specialities it expects similar EBITDA in 2023 to the 2022 level.