Report on Economic Position – Results of Operations, Financial Position, and Net Assets of the Covestro Group

Net Assets

Total assets declined by €986 million from €15,571 million as of December 31, 2021, to €14,585 million as of December 31, 2022.

Noncurrent assets decreased by €694 million to €7,916 million (previous year: €8,610 million) and accounted for 54.3% (previous year: 55.3%) of total assets. This change is mainly due to the impairment loss on deferred tax assets and lower property, plant and equipment and intangible assets. This was in particular the result of impairment losses recognized as part of impairment testing in the fiscal year under review.

Current assets were down €292 million to €6,669 million (previous year: €6,961 million), and their ratio to total assets was 45.7% (previous year: 44.7%). This change is mainly due to a decline in current financial assets, trade accounts receivable, and inventories, while cash and cash equivalents increased year over year.

Structure of the Covestro Group’s statement of financial position

Equity decreased by €640 million to €7,122 million as of December 31, 2022 (previous year: €7,762 million). The equity ratio at the reporting date was 48.8% (previous year: 49.8%). The main reasons for the decline in equity were the dividend distribution for fiscal 2021, income after income taxes for fiscal 2022, and the acquisition of treasury shares. Conversely, the remeasurement of the net defined benefit liability for post-employment benefits was a predominant factor increasing equity.

Noncurrent liabilities went up by €205 million to €4,408 million as of the reporting date (previous year: €4,203 million) and accounted for 30.3% (previous year: 27.0%) of total capital and 59.1% (previous year: 53.8%) of liabilities. This is primarily due to an increase in noncurrent financial liabilities. Lower provisions for pensions and other post-employment benefits had an offsetting effect.

The net defined benefit liability for post-employment benefits (provisions for pensions and other post-employment benefits less net defined benefit asset) was down by €765 million in the reporting year to €430 million (previous year: €1,195 million). This was due to actuarial gains, especially those attributable to the increase in the discount rate in Germany and the United States, offset by actuarial losses on plan assets.

Current liabilities went down by €551 million to €3,055 million (previous year: €3,606 million) and therefore accounted for 20.9% (previous year: 23.2%) of total capital and 40.9% (previous year: 46.2%) of liabilities. This decline was mainly driven by lower provisions for short-term variable compensation and trade accounts payable, offset by higher current financial liabilities.