Notes to the Consolidated Financial Statements of the Covestro Group – Notes to the Statement of Financial Position

19. Equity

The individual components of equity and changes in equity in fiscal years 2021 and 2022 are presented in the Covestro Group consolidated statement of changes in equity.

Authorized and Conditional Capital

The Annual General Meeting (AGM) adopted a resolution on April 16, 2021, authorizing the Board of Management, with the approval of the Supervisory Board, to increase the capital stock of the company by up to €57,960,000 in the period through April 15, 2026 by issuing new, no-par value bearer shares against cash contributions and/or contributions in kind (Authorized Capital 2021).

The Authorized Capital 2021 has not been utilized to date.

On July 30, 2020, the AGM authorized the Board of Management to issue bonds with conversion or exchange rights or warrants, or with conversion obligations, or a combination of these instruments on up to 18,300,000 no-par value bearer shares of Covestro AG. Based on this authorization, convertible/warrant bonds can be issued up to a total nominal value of €2 billion by the company or a Group company in the period through July 29, 2025. The AGM in the year 2020 also resolved to conditionally increase the capital stock by up to €18.3 million by issuing up to 18,300,000 no-par value bearer shares to grant shares to the holders or creditors of such convertible/warrant bonds (Conditional Capital 2020).

The Conditional Capital 2020 has not been utilized to date.

Capital Stock

The capital stock of Covestro AG changed as follows in fiscal 2022:

Covestro AG’s capital stock as of December 31, 2022, is divided into 193,200,000 (previous year: 193,200,000) no-par value bearer shares and is fully paid up. Each share confers the right to one vote.

Covestro AG repurchased a total of 3,479,956 treasury shares as part of the share buyback program in 2022. Covestro AG also issued 228,321 (previous year: 39,456) treasury shares to employees of the German legal entities under the Covestment share-based participation program. As of December 31, 2022, the company held 3,251,635 treasury shares (previous year: 0), corresponding to 2% of the capital stock.

The cost of acquiring the treasury shares held by Covestro AG at the end of the fiscal year came to €139 million. Measurement was carried out according to the FIFO method. The average price paid per share under the share buyback program amounted to €43.11 per share.

Capital Reserves

Covestro AG’s capital reserves as of December 31, 2022, amounted to €3,788 million (previous year: €3,927 million). The year-over-year decline is primarily attributable to the acquisition of treasury shares (€147 million) as part of the share buyback program. This was partially offset by the issuance of treasury shares as part of the Covestment share-based participation program.

The capital reserves include premiums from the issue of shares.

Retained Earnings and Other Comprehensive Income

Retained earnings totaled €2,480 million (previous year: €3,002 million) as of December 31, 2022.

Retained earnings consist of the net income earned both in the current fiscal year and in the past less the dividends paid. It also includes all remeasurements of the net defined benefit liability for post-employment benefit plans recognized in other comprehensive income. Accumulated other comprehensive income includes foreign currency effects from the translation of the annual financial statements of foreign subsidiaries that are recognized directly in equity.

Dividend

The dividend available for distribution is based on the distributable profit reported in the annual financial statements of Covestro AG, which were prepared according to the provisions of the German Commercial Code (HGB). In view of the Group’s negative net income, no dividend will be paid to Covestro AG shareholders for fiscal 2022 in accordance with the current dividend policy. For fiscal 2021, a dividend of €3.40 per share carrying dividend rights was paid in April 2022.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income was as follows:

Noncontrolling Interests

Noncontrolling interests mainly relate to the equity of Sumika Covestro Urethane Company, Ltd., Hyogo (Japan), Covestro Eternal Resins (Kunshan) Co., Ltd., Kunshan (China), Covestro Eternal Resins (Far East) Ltd. Pingtung (Taiwan, Greater China), DIC Covestro Polymer Ltd., Tokyo (Japan), and Covestro (Taiwan) Ltd., Kaohsiung City (Taiwan, Greater China).

The changes in equity attributable to noncontrolling interests are presented in the following table: