Results of Operations
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|
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20181 |
2019 |
Change |
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|
€ million |
€ million |
% |
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|
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Sales |
14,616 |
12,412 |
–15.1 |
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Cost of goods sold |
(9,918) |
(9,658) |
–2.6 |
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Selling expenses |
(1,408) |
(1,380) |
–2.0 |
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Research and development expenses |
(276) |
(266) |
–3.6 |
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General administration expenses |
(491) |
(372) |
–24.2 |
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Other operating expenses (–) and income (+) |
57 |
116 |
>100 |
||||||
EBIT |
2,580 |
852 |
–67.0 |
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Financial result |
(104) |
(91) |
–12.5 |
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Income before income taxes |
2,476 |
761 |
–69.3 |
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Income taxes |
(647) |
(204) |
–68.5 |
||||||
Income after income taxes |
1,829 |
557 |
–69.5 |
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of which attributable to noncontrolling interest |
6 |
5 |
–16.7 |
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of which attributable to Covestro AG stockholders (net income) |
1,823 |
552 |
–69.7 |
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Group sales in the reporting year dropped by 15.1% to €12,412 million (previous year: €14,616 million).
There was a 2.6% decrease in the cost of goods sold to €9,658 million (previous year: €9,918 million) on account of lower raw material prices. The ratio of the cost of goods sold to sales increased to 77.8% (previous year: 67.9%).
Selling expenses were down by 2.0% to €1,380 million (previous year: €1,408 million), yielding a ratio of selling expenses to sales of 11.1% (previous year: 9.6%). Research and development (R&D) expenses of €266 million decreased by 3.6% (previous year: €276 million). As a share of sales, this produced an R&D ratio of 2.1% (previous year: 1.9%). The funds were used mainly for developing new application solutions for our products and improving products and process technologies. The R&D projects are aligned to sustainability aspects.
General administration expenses saw a decrease of 24.2% to €372 million (previous year: €491 million).
A decline in provisions for short-term variable compensation had a positive effect on all functional costs.
Other operating income exceeded other operating expenses by €116 million (previous year: €57 million). This included items such as a gain from the sale of the European systems house business in the fourth quarter of 2019 amounting to €34 million, insurance reimbursements of €63 million, and a gain of €19 million from the remeasurement of shares of Japan-based DIC Covestro Polymer Ltd. previously accounted for under the equity method.
In the reporting period, EBIT amounted to €852 million, down 67.0% (previous year: €2,580 million). As a result, the EBIT margin decreased to 6.9% (previous year: 17.7%).
In fiscal 2019, the financial result was €–91 million (previous year: €–104 million). The key component of the financial result is the net interest expense totaling €–45 million (previous year: €–47 million). A negative effect from the application of IFRS 16 in the amount of €21 million is included in net interest expense. Conversely, lower hedging costs had a positive effect on net interest expense. Including the financial result, income before income taxes declined 69.3% to €761 million (previous year: €2,476 million). Due to earnings, the income tax expense dropped by 68.5% to €204 million (previous year: €647 million). After taxes and noncontrolling interests, net income was down 69.7% and amounted to €552 million (previous year: €1,823 million).