Results of Operations, Financial Position and Net Assets of Covestro AG

Covestro AG is the parent company and strategic management holding company of the Covestro Group. The principal management functions for the entire Group are performed by the Board of Management. These include strategic planning for the Group, resource allocation and executive and financial management. Covestro AG’s net assets, financial position and results of operations are largely determined by the business performance of its subsidiaries.

The financial statements of Covestro AG are prepared in accordance with the (HGB) and the (AktG). The company, headquartered in Leverkusen (Germany), is registered in the commercial register of the Local Court of Cologne under No. HRB 85281.

There is a control and profit and loss transfer agreement between Covestro AG and Covestro Deutschland AG, Leverkusen (Germany). All profit not subject to a prohibition on transfer is transferred in full to Covestro AG at the end of the year. Losses are absorbed in full. Other retained earnings recognized during the term of the agreement must be released upon request by Covestro AG and used to compensate a net loss for the year or transferred as profit.

Results of operations

Covestro AG income statements according to the German Commercial Code

 

 

 

 

 

 

 

2018

 

2019

 

 

€ million

 

€ million

Income from investments in affiliated companies - net

 

745

 

695

Interest expense - net

 

(18)

 

(14)

Other financial income - net

 

(6)

 

(3)

Net sales

 

23

 

21

Cost of services provided

 

(22)

 

(19)

General administration expenses

 

(79)

 

(48)

Other operating income

 

25

 

Other operating expenses

 

(1)

 

(3)

Income before income taxes

 

667

 

629

Income taxes

 

(171)

 

(6)

Net income

 

496

 

623

Retained earnings brought forward from prior year

 

3

 

1

Allocation to other retained earnings

 

(60)

 

(185)

Distributable profit

 

439

 

439

In fiscal 2019, Covestro AG generated of €623 million (previous year: €496 million), which stemmed largely from income from investments in affiliated companies totaling €695 million (previous year: €745 million). Income from investments in affiliated companies is solely attributable to income from the control and profit and loss transfer agreement with Covestro Deutschland AG.

General administration expenses totaling €48 million (previous year: €79 million) mainly consisted of personnel expenses for the employees of the holding company and members of the Board of Management. The year-over-year decline in the amount of €31 million is chiefly attributable to a decrease in expenses for short-term variable compensation and lower expenditure on strategic projects. The interest result includes interest expense of €14 million for the bonds issued. Other income and expense items had no notable effect on earnings. The result of operations was €629 million (previous year: €667 million) and led to income taxes of €6 million (previous year: €171 million). Taking into account the profit brought forward from the previous year and an allocation of €185 million (previous year: €60 million) to other retained earnings, there was a distributable profit of €439 million as in the previous year.

Our goal for the 2019 fiscal year was to generate distributable profit that would enable our stockholders to adequately participate in the Covestro Group’s earnings. The Board of Management and the Supervisory Board are proposing a dividend of €2.40 per share carrying dividend rights for the 2019 fiscal year to the Annual General Meeting.

Net assets and financial position

Covestro AG statements of financial position according to the German Commercial Code

 

 

 

 

 

 

 

Dec. 31,2018

 

Dec. 31,2019

 

 

€ million

 

€ million

ASSETS

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

1,767

 

1,767

Intangible assets, property, plant and equipment

 

1

 

1

Financial assets

 

1,766

 

1,766

 

 

 

 

 

Current assets

 

3,839

 

3,999

Trade accounts receivables

 

25

 

7

Receivables from affiliated companies

 

3,762

 

3,902

Other assets

 

52

 

90

 

 

 

 

 

Deferred charges

 

7

 

5

 

 

 

 

 

Excess of plan assets over pension liability

 

7

 

8

 

 

 

 

 

Total assets

 

5,620

 

5,779

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

Equity

 

4,444

 

4,636

 

 

 

 

 

Capital stock

 

183

 

183

Own shares

 

 

Issued capital

 

183

 

183

Capital reserves

 

3,493

 

3,500

Other retained earnings

 

329

 

514

Distributable profit

 

439

 

439

Provisions

 

160

 

125

 

 

 

 

 

Provisions for pensions

 

3

 

3

Provisions for taxes

 

108

 

81

Other provisions

 

49

 

41

Liabilities

 

1,016

 

1,018

Bonds

 

1,000

 

1,000

Trade accounts payables

 

10

 

11

Payables to affiliated companies

 

1

 

3

Other liabilities

 

5

 

4

 

 

 

 

 

Total equity and liabilities

 

5,620

 

5,779

Covestro AG had total assets of €5,779 million as of December 31, 2019 (previous year: €5,620 million). The net assets and financial position of Covestro AG are dominated by its role as a holding company in managing subsidiaries and financing corporate activities. This is primarily reflected in the levels of financial assets (30.6% of total assets) and receivables from (67.5% of total assets), and payables to, Group companies.

Receivables from affiliated companies increased by €140 million to €3,902 million (previous year: €3,762 million). This is primarily due to a correspondingly higher intercompany loan to Covestro Deutschland AG.

All receivables and other assets have maturities of less than one year.

Property, plant, equipment and intangible assets were of secondary importance. At €12 million, current other receivables, including deferred income, were also immaterial in relation to total assets. Other assets of €90 million (previous year: €52 million) mainly included income tax and VAT receivables.

Covestro AG’s equity amounted to €4,636 million (previous year: €4,444 million). This corresponds to an equity ratio of 80.2% (previous year: 79.1%). Changes in equity in fiscal 2019 were attributable to the payout of the dividend for fiscal 2018 in the amount of €438 million and an allocation of €185 million to retained earnings (previous year: €60 million). Treasury shares were issued to employees as part of a stock participation program (), thereby increasing capital reserves by €7 million in the fiscal year.

In contrast to equity, provisions amounted to €125 million (previous year: €160 million) and other liabilities totaled €1,018 million (previous year: €1,016 million).

Provisions comprised provisions for pensions and other post-employment benefits of €3 million (previous year: €3 million), tax provisions of €81 million (previous year: €108 million), and other provisions of €41 million (previous year: €49 million). The bonds have the following maturities: €1,000 million due within a period of one to five years. All other liabilities are due within one year.

HGB/German Commercial Code
Comprises much of the German accounting legislation
AktG/German Stock Corporation Act
Regulates the legal provisions pertaining to German stock corporations
Net income
Income after income taxes that is attributable to the stockholders
Covestment
Stock participation program in which approximately 97% of all employees worldwide can acquire Covestro shares at a discount