Annual Report 2022

Aerial view of a plant with green overlay (graphic)

Business Performance at a Glance

Significant Events

Events outside the Company

War in Ukraine

The Russian war against Ukraine, which began in February 2022, had a notable impact on the global economy. The consequences for the energy and raw material markets also influenced Covestro’s business situation. Covestro discontinued its business activities with Russia and Belarus in fiscal 2022; in previous years, these had accounted for less than 1% of Group sales. The Covestro company (a sales support office) in Russia was liquidated in the process. This means that Covestro does not operate any locations in Russia, Belarus, or Ukraine so that the international sanctions imposed on Russia and Belarus only had an indirect effect on Covestro’s business.

Covestro reacted to the humanitarian crisis in Ukraine and its neighboring countries by donating aid for this purpose to UNO-Flüchtlingshilfe and local aid organizations in Ukraine’s neighboring countries.

Energy Crisis and Drop in Demand

The situation on the energy markets worsened in fiscal 2022 compared with the previous year for reasons that include the complete suspension of Russian gas supplies to Europe; this led to considerable fluctuations and a significant increase in energy prices in the course of the year, especially in Europe.

Covestro is an energy-intensive company and depends to a large extent on gas. It is predominantly used as a source of energy and as process gas in chemical reactions and there is no comprehensive short-term substitute for gas in the production processes. For this reason, Covestro, along with large parts of the chemical industry, was majorly affected by the high and volatile energy prices, which could be passed on to customers only in part. Covestro continued to receive gas supplies to meet its demand in the year 2022, thus ensuring supplies at our production sites.

The considerable rise in energy prices and weak demand as a consequence of the global economic slowdown worsened the business situation in the year under review and business prospects for the year 2023. Europe was particularly affected by the adverse macroeconomic framework. In addition, there was a significant increase in borrowing costs. The above facts were the main reason for subjecting all cash-generating units to an impairment test in the reporting year. Impairment tests led to the recognition of impairment losses on some items of property, plant and equipment and intangible assets. Impairment losses recognized in the fiscal year totaled €463 million. Other factors included impairment losses on, or the non-recognition of, deferred tax assets on tax loss carryforwards in an amount of €255 million. The above effects were a major driver of the Group’s net loss in the reporting year.

Coronavirus Pandemic

The coronavirus pandemic did not have any direct impact on Covestro in the year 2022. Production at Covestro’s sites was unaffected by the pandemic, although logistical bottlenecks emerged at the Shanghai (China) site in the course of the first half of 2022. This had significant indirect effects on business performance in the APAC region in the second quarter of 2022. These bottlenecks did not persist in the second half of 2022.

The health, safety, and hygiene measures implemented by Covestro were regularly reviewed and modified to address current conditions. Employees in the EMLA and NA regions gradually returned to the workplace. Especially in China, part of the workforce, particularly employees in administrative departments, continued to work from home.

Events within the Company

New Management System

From fiscal 2022 onward, Covestro’s management system will have four instead of the previous three components: Core volume growth, the previous key management indicator for growth, will be replaced with EBITDA. Liquidity is measured in terms of free operating cash flow (FOCF), and profitability in terms of return on capital employed (ROCE) above the weighted average cost of capital (WACC). In addition, a sustainability component has been added, which takes account of selected ESG (environmental, social, governance) criteria. In the year 2022, direct and indirect (Scope 1 and Scope 2) greenhouse gas (GHG) emissions of the main sites were relevant for this component. Other criteria relating to social and corporate governance are also to be incorporated in the future.

Climate Neutrality by the Year 2035

In the course of Covestro’s efforts to make plastics production fully circular, on March 1, 2022, the company communicated new climate targets to reduce its direct greenhouse gas (GHG) emissions from its own production activities (Scope 1) and indirect GHG emissions from the provision and use of energy produced outside the company (Scope 2). The Group is striving to become climate-neutral and to reach net-zero GHG emissions* at all environmentally relevant sites by the year 2035. The company plans to reduce Scope 1 and Scope 2 GHG emissions by 60% compared with the year 2020 to 2.2 million metric tons of CO2 equivalents by the year 2030. In the long term, Covestro’s goal is to use up to 100% renewable energy such as wind and solar power as well as alternative raw materials such as biomass, waste, CO2, and hydrogen in its production processes. In addition, a target for the long-term reduction of indirect GHG emissions from upstream and downstream processes in the value chain (Scope 3) is to be defined in the year 2023.

*Achievement of net-zero GHG emissions is defined as a balance between anthropogenic production of GHG emissions (caused by the company’s own production activities and by the provision and use of energy produced outside the company) and anthropogenic reduction of GHG emissions.

CEO Dr. Markus Steilemann’s Contract Extended

In June 2022, the Supervisory Board prematurely extended, to May 31, 2028, the contract with Dr. Markus Steilemann, which was due to expire in May 2023. This means that he will remain the CEO of Covestro AG for another five years. Dr. Markus Steilemann has been a member of Covestro AG’s Board of Management since September 2015 and its Chair since June 2018. In his function as CEO, he is responsible for the Strategy, Sustainability & Public Affairs, Group Innovation, Corporate Audit, Human Resources, and Communications corporate functions.

New Chief Technology Officer Appointed

In November 2022, the Supervisory Board unanimously appointed Dr. Thorsten Dreier as Covestro AG´s Chief Technology Officer (CTO). As of July 1, 2023, he will succeed Dr. Klaus Schäfer, who had extended his contract, which would originally have expired at the end of 2022, by six months to ensure staffing stability for Covestro given the tense policy situation in the energy markets. In his role as CTO, Dr. Thorsten Dreier will be responsible in future for the corporate functions of Process Technology; Engineering; Group Health, Safety and Environment; and Group Procurement.

Sale of Additive Manufacturing Business

On August 5, 2022, Covestro signed an agreement for the sale of its additive manufacturing business to Stratasys, a U.S.-Israeli manufacturer of 3D printers and 3D production systems. The selling price amounts to €43 million and an additional payment for certain assets, less any liabilities transferred. In addition, the agreement specifies a variable earn-out payment, which depends on the achievement of various success factors. The business offers material solutions for common polymer 3D printing processes. The portfolio of the additive manufacturing business also comprises products of the Resins & Functional Materials business acquired from Koninklijke DSM N.V., Heerlen (Netherlands), in fiscal 2021. The transaction is now expected to be completed in the second quarter of 2023.

Financing Measures

Extension of the Revolving Credit Facility and Establishment of the Green Financing Framework

In March 2022, the second of two agreed options was exercised to extend the term of the five-year, €2.5 billion syndicated revolving credit facility obtained in fiscal 2020 by another year until March 2027. This facility provides a back-up cash reserve and is linked to an ESG rating. In May 2022, Covestro also published a Green Financing Framework, which supports Covestro’s strategic goals and allows it to finance green projects with green financing instruments (such as bonds or other debt instruments). In this context, Covestro issued its first green euro bond with a total volume of €500 million on November 8, 2022. The bond, which has a maturity of six years ending in November 2028, has an annual coupon of 4.75%.

Share Buyback Program

On February 28, 2022, Covestro AG’s Board of Management resolved to initiate a share buyback program. The total volume of the program is approximately €500 million (excluding transaction costs), and it is expected to be completed within two years. All repurchased shares are subsequently expected to be retired and the capital stock reduced accordingly. Share buybacks began in March 2022. By the end of the year 2022, Covestro AG had acquired 3,479,956 shares valued at €150 million in two tranches.

Issuance of a Euro Commercial Paper Programme (ECPP)

On August 26, 2022, Covestro established a Euro Commercial Paper Programme (ECPP) with a potential total volume of €1.5 billion in order to allow the company to issue notes in different currencies and tenors of up to one year on a flexible basis. As of December 31, 2022, no commercial paper was outstanding under the ECPP.

Covestro Successfully Places Schuldschein Loans

Covestro issued its first-ever Schuldschein loans on October 7, 2022. Linked to an ESG rating, these loans were issued in tranches comprising fixed and variable interest rates with terms of three, five, and seven years. The issue is denominated in U.S. dollars and euros. Driven by strong demand, the Schuldschein loans reached a total volume of €650 million equivalent, significantly exceeding the volume of €300 million originally announced. €100 million of the firm Schuldschein loan commitment will only be paid out in the first quarter of 2023.

Overall Assessment of Business Performance and Target Attainment

Negative changes in the economic environment made the fiscal year 2022 very challenging for Covestro. Driven in particular by a higher selling price level, sales were up by 13.0% year over year to €17,968 million (previous year: €15,903 million), the highest ever recorded in the Group’s history. However, the sharp rise in raw material and energy prices in the course of the year, which could be passed on to customers only in part, and weak demand as a consequence of the global economic slowdown led to a 47.6% decline in EBITDA to €1,617 million (previous year: €3,085 million). Moreover, the Group’s net income was weighed down in the fiscal year by impairment losses on some items of property, plant and equipment and intangible assets in an amount of €463 million and impairment losses on or the non-recognition of deferred tax assets on tax loss carryforwards in an amount of €255 million. As a result, the Group recorded its first ever net loss of €272 million (previous year: net income of €1,616 million). Free operating cash flow stood at €138 million (previous year: €1,429 million). The year-over-year decline was mainly attributable to lower cash flows from operating activities, tracking the decrease in EBITDA. In addition, ROCE above WACC was –5.0% points (previous year: 12.9% points). The year-over-year decline was attributable to significantly lower net operating profit after taxes (NOPAT) and a simultaneous substantial rise in capital employed, primarily due to the acquisition of the Resins & Functional Materials (RFM) business from Koninklijke DSM N.V., Heerlen (Netherlands), in the second quarter of 2021. At the same time, GHG emissions of 4.7 million metric tons of CO2 equivalents were significantly down on the prior-year value of 5.2 million metric tons of CO2 equivalents. This was mainly caused by the reduction in production activity and the resulting drop in energy demand, especially for electricity and steam.

In the Annual Report 2021, the Covestro Group published a forecast for key management indicators in fiscal 2022. Due to the effects of the Russian war against Ukraine and the adverse macroeconomic conditions, Covestro updated the forecast in the course of the year, on May 2, 2022 and July 29, 2022, and narrowed the guidance on October 25, 2022. 

The forecast for all key management indicators was also adjusted. The Covestro Group most recently anticipated EBITDA between €1,700 million and €1,800 million after originally projecting EBITDA between €2,500 million and €3,000 million. After initially projecting FOCF of between €1,000 million and €1,500 million, in October 2022 the Covestro Group ultimately forecast a figure between €0 million and €100 million for the full year. The original forecast for ROCE above WACC was between 5% and 9%; it was recently adjusted to between –2% and –1%. For GHG emissions, the Covestro Group had originally anticipated a figure between 5.6 million metric tons of CO2 equivalents and 6.1 million metric tons of CO2 equivalents. In October 2022, the projected range was between 5.0 million metric tons of CO2 equivalents and 5.4 million metric tons of CO2 equivalents.

Covestro did not meet the original forecast of its financial performance indicators issued in the Annual Report 2021. Compared with the previous year, EBITDA decreased to €1,617 million (previous year: €3,085 million), mainly due to a considerable decline in margins. In particular, lower EBITDA also reduced free operating cash flow (FOCF), which declined to €138 million (previous year: €1,429 million). ROCE above WACC was –5.0% points (previous year: 12.9% points). The forecast of the nonfinancial key management indicator for reducing GHG emissions was exceeded. At 4.7 million metric tons of CO2 equivalents, GHG emissions were significantly below the forecast range. 

Compared to the forecast figures, which were last adjusted in October 2022, EBITDA and ROCE above WACC were lower than the ranges communicated. FOCF and GHG emissions, however, performed better than indicated in the most recent forecast. Given the potential divergence from capital market expectations, Covestro decided on January 13, 2023, to publish preliminary results.

Target attainment for fiscal year 2022














Forecast 20221


Adjusted forecast 20222


Target attainment 2022



€3,085 million


Between €2,500 million
and €3,000 million


Between €1,700 million
and €1,800 million


€1,617 million

Free operating cash flow4


€1,429 million


Between €1,000 million
and €1,500 million


Between €0 million
and €100 million


€138 million

ROCE above WACC5, 6


12.9% points


Between 5% points
and 9% points


Between –2% points
and –1% point


–5.0% points

Greenhouse gas emissions7 (CO2 equivalents)


5.2 million metric tons


Between 5.6 million metric tons
and 6.1 million metric tons


Between 5.0 million metric tons
and 5.4 million metric tons


4.7 million metric tons


Published on March 1, 2022 (Annual Report 2021).


Published on October 25, 2022 (Quarterly Statement as of September 30, 2022).


Earnings before interest, taxes, depreciation and amortization (EBITDA): EBIT plus depreciation, amortization, and impairment losses; less impairment loss reversals on intangible assets and property, plant and equipment.


Free operating cash flow (FOCF): cash flows from operating activities less cash outflows for additions to property, plant, equipment and intangible assets.


Return on capital employed (ROCE): ratio of EBIT after imputed income taxes to capital employed. Since the year 2022, imputed income taxes have been calculated by multiplying an imputed tax rate (previously: effective tax rate) of 25% by EBIT.


Weighted average cost of capital (WACC): weighted average cost of capital reflecting the expected return on the company’s equity and debt capital. A figure of 7.0% has been taken into account for the year 2022 (2021: 6.6%).


GHG emissions (Scope 1 and Scope 2, GHG Protocol) at main production sites (responsible for more than 95% of our energy usage).

Comprises all countries in the Asia and Pacific region.
Capital Employed
Capital employed is the sum of noncurrent and current assets less non-interest-bearing liabilities such as trade accounts payable.
EBITDA / Earnings Before Interest, Taxes, Depreciation, and Amortization
EBIT plus depreciation and amortization of property, plant, equipment, and intangible assets.
Comprises all countries in Europe, the Middle East, Latin America (excluding Mexico), and Africa.
FOCF / Free Operating Cash Flow
Operating cash flows (pursuant to IAS 7) less cash outflows for additions to property, plant, equipment and intangible assets.
NA / North America
Region comprising Canada, Mexico, and the United States.
NOPAT / Net Operating Profit after Taxes
EBIT after imputed income taxes.
ROCE / Return on Capital Employed
Ratio of EBIT after imputed income taxes to capital employed.
WACC / Weighted Average Cost of Capital
Weighted average cost of capital reflecting the expected return on the company’s equity and debt capital. Used for the internal measurement of the absolute value contribution.

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