Covestro on the Capital Market

Performance of Covestro stock versus market in fiscal year 2020

€ (Covestro share)

Volatile stock market influenced by the pandemic

Much like the global economy, the stock markets felt the effects of the worldwide coronavirus pandemic in fiscal 2020. During the initial weeks of the year 2020, European equity markets continued the upward trajectory they began in the year 2019. Mid-February 2020 brought a steep drop in share prices in reaction to the global spread of the coronavirus: The EURO STOXX 50* index lost around 40% of its value by its low point on March 18, 2020, and a comparable crash took place on the DAX, the leading German index relevant for Covestro. By the end of the year, the stock markets had largely recovered from their low points, and they closed the year at the prior-year level. The EURO STOXX 50 ended fiscal year 2020 at 3,572 points, 4.7% lower than in the previous year, whereas the DAX finished the year at 13,719 points, a slight increase of 3.5% year over year.

European chemical stocks essentially followed the same trajectory, but recovered at a faster pace in the second half of the year. As of December 31, 2020, the STOXX Europe 600 Chemicals index was up 10.8% from its level at the beginning of the year. At a Xetra closing price of €50.48, Covestro’s share price also finished the volatile stock market year up significantly, by 21.8% over December 31, 2019. Covestro’s stock marked its low for the year on March 16, 2020, closing at €24.90. The high for the year was €51.24 on December 15, 2020.

Including the dividend for the 2019 fiscal year of €1.20 per share paid out on August 4, 2020, Covestro’s stock performance (with dividend reinvestment) was 26.2% compared with the 2019 year-end closing price of €41.45.

Dividend performance

Dividend per share carrying dividend rights (€)

At the end of the reporting period, Covestro’s market capitalization stood at around €9.8 billion based on the capital stock of 193.2 million shares. The average daily Xetra trading volume was approximately 1.5 million shares.

ADR program successful for fourth year

Since December 1, 2016, the American Depositary Receipt (ADR) program has granted global investors simplified access to Covestro stock. Covestro ADRs are traded over the counter in the United States under the COVTY ticker symbol. The total number of outstanding ADRs reached some 2.2 million at the end of fiscal 2020 (previous year: around 1.9 million).

Virtual Annual General Meeting (AGM)

The Covestro AG 2020 Annual General Meeting was originally planned for April 17, 2020, in Bonn, but had to be postponed to a later date due to the rapid spread of the coronavirus at that time. Ultimately, a virtual AGM was held for the first time on July 30, 2020.

Due to the ongoing coronavirus pandemic and the resulting lack of certainty in planning physical events, Covestro AG also intends to hold the 2021 Annual General Meeting scheduled for April 16, 2021, in a virtual format.

Moody’s downgrades Covestro’s rating

On October 7, 2015, one day after Covestro stock was listed on the Frankfurt Stock Exchange, Covestro AG received an investment-grade rating of Baa2 from London-based Moody’s Investors Service. Moody’s raised the company’s credit rating from Baa2 to Baa1 with stable outlook on July 30, 2018. On June 2, 2020, Moody’s revised the rating downward again from Baa1 to Baa2 with a negative outlook. Covestro’s credit rating therefore remains firmly in the investment-grade range. In the future, Covestro intends to continue to maintain financing structures and financial ratios that support a solid investment-grade rating.

Successful placement of euro bonds

On June 5, 2020, Covestro successfully placed €1.0 billion in euro bonds on debt markets. The bonds mature in February 2026 and June 2030 and carry coupon rates of 0.875% and 1.375%, respectively. Robust investor demand led to the placement volume being oversubscribed by more than ten times. The transactions enable Covestro to significantly extend the average maturity of the bond portfolio. The proceeds of the bond placement will be used to further reinforce Covestro’s liquidity in view of the economic effects of the coronavirus pandemic and to provide funds to repay the existing bond maturing in fiscal 2021.

Successful capital increase for acquisition financing

In the course of acquiring the Resins & Functional Materials (RFM) business from Koninklijke DSM N.V., Heerlen (Netherlands), Covestro completed a capital increase partially utilizing Authorized Capital 2020. As part of the capital increase on October 13, 2020, an accelerated bookbuilding process was used to place 10,200,000 new, no-par value bearer shares with institutional investors. The new shares carry full dividend rights for fiscal year 2020. The placement price of €43.85 per share represents a discount of 0.9% from the Xetra closing price of €44.25 on October 13, 2020. The gross issuing proceeds before commission and costs of €447 million will be used to partly finance the announced RFM acquisition, which totals €1.6 billion. Covestro’s capital stock of €183 million increased by 5.6% to €193 million as a result of this capital measure.

Majority of analysts issue buy recommendation for Covestro stock

At the end of the year 2020, Covestro was covered by 24 securities brokers. Of these, 17 analysts issued buy recommendations, and five were neutral. Two analysts recommended selling Covestro stock. The average share price target was approximately €55 at year-end.