Covestro Shares

Performance of Covestro shares versus market in fiscal year 2023

€ (Covestro shares)

Performance of Covestro Shares Exceeds Increase in Benchmark Indices

Similar to the previous year, fiscal 2023 was affected by the consequences of the Russian war against Ukraine and, to a small extent, by the effects of the global coronavirus pandemic. The energy crisis caused by Russia’s war of aggression on Ukraine continued to weigh on global economic performance and, in combination with a considerable rise in inflation, led to significant declines in the manufacturing industry. The services industry, on the other hand, benefited from the lifting of all coronavirus measures and the regained freedom of travel and association. The DAX therefore did not reflect this negative trend in the manufacturing industry directly, rising by 19.6% to 16,751.64 points in the course of the year. Despite two intervening periods of weakness, the European benchmark index EURO STOXX 50* increased by 19.2% year-over-year, to 4,521.65 points, driven by significant gains in the course of the fourth quarter of 2023.

The weaker trend of European chemical stocks in particular in the course of 2023 compared with the DAX and EURO STOXX 50 benchmark indices was attributable to the impact of the energy crisis and low demand from the processing industry. Most of the benefits of significantly lower raw material prices in the course of 2023 had to be passed on to customers. The challenging earnings situation therefore continued. By December 31, 2023, the STOXX Europe 600 Chemicals** index was up by only 16.6% from its level at the beginning of the year.

At a Xetra closing price of €52.68, Covestro’s share price had gained 44.1% at the end of the year 2023 compared with December 31, 2022, thus significantly outperforming the DAX and the STOXX Europe 600 Chemicals indices. The share price started the year 2023 with an upward movement, but then declined in the course of the first quarter of 2023, reaching a low of €35.36 on March 15, 2023. During the second quarter of 2023, Covestro’s share price trended slightly higher, interspersed by brief periods of price weakness. Since the beginning of June 2023, the share price has been on an upward trajectory, preceded mainly by market rumors of an intended takeover by the Abu Dhabi National Oil Company (ADNOC), Abu Dhabi (United Arab Emirates). On September 8, 2023, Covestro reported that it was starting open discussions with ADNOC, and in response the share price increased above the €50 threshold. In the fourth quarter of 2023, the share price declined briefly, but broke again through the €50 mark at the beginning of December 2023. Following renewed rumors in connection with the ADNOC discussions, it reached its high for the year at €53.74 just before the close and largely retained this price level until the end of the year.

Compared with the closing price of €36.55 for the year 2022, this corresponds to a share price performance (without dividend reinvestment since no dividend was paid for fiscal 2022) of 44.1%.

Dividend performance

Dividend per share carrying dividend rights (€)

At the end of the reporting period, Covestro’s market capitalization stood at €9.9 billion based on 188.7 million shares outstanding. The average daily Xetra trading volume was 1.1 million shares.

Dividend Policy

Since the 2020 Financial Statements, Covestro AG’s dividend policy has been more closely linked to the Group’s overall business situation. The policy specifies that Covestro AG should distribute between 35% and 55% of the Group’s net income to shareholders of Covestro AG. The Group’s net income was negative in the reporting period, showing another net loss of €198 million. Under the dividend policy, this means that, again, no dividend will be distributed to shareholders of Covestro AG for fiscal year 2023.

Moody’s Confirms Covestro Rating

On June 21, 2023, Moody’s Investors Service, London (United Kingdom), confirmed Covestro’s Baa2 investment-grade rating with a stable outlook. Covestro intends to continue to maintain financing structures and financial ratios that support a solid investment-grade rating in the future.

Annual General Meeting on April 19, 2023

Covestro AG’s 2023 Annual General Meeting (AGM) was held on April 19, 2023. Taking account, in particular, of legislation, the ownership structure, expected costs, the pandemic situation at the time, and the experience made in recent years, Covestro had resolved at the end of the year 2022 to hold a virtual AGM.

The AGM ratified the actions of the Board of Management and Supervisory Board for the past fiscal year 2022 with a large majority. The Group’s net income was negative for the first time in fiscal 2022, showing a net loss of €272 million. Under the current dividend policy, this means that no dividend was distributed to shareholders of Covestro AG. Similar to the resolution proposals on ratification of the actions of the Board of Management and Supervisory Board, all other proposed resolutions were passed with large majorities.

Share Buyback Program

Based on the resolution adopted at the 2019 AGM, Covestro AG’s Board of Management on February 28, 2022 resolved a share buyback program totaling around €500 million (excluding transaction costs), which was expected to be completed within two years.

By the end of the first half of 2022, 3,479,956 shares worth €150 million had already been bought back in two tranches at an average price of €43.08 per share. Due to the weakening economic outlook, the Board of Management resolved in the second half of 2022 to pause the share buyback program temporarily.

In view of the revised guidance of April 2023 and the sequential improvement in earnings and volumes, the current program resumed in the second quarter of 2023. The third tranche, which had a volume of €49 million, was completed at the end of June 2023 and resulted in the buyback of 1,208,035 shares at an average price of €40.81 per share.

On October 26, 2023, the Board of Management resolved to terminate the share buyback program early. Covestro AG had thus acquired a total of 4,687,991 shares valued at €199 million in three tranches. In December 2023, 4,200,000 of the repurchased shares were retired and the capital stock was reduced accordingly.

Covestro is planning to request a renewal of the corresponding authorization at the AGM 2024 in order to be able to carry out more share buybacks in the future. All repurchased shares are subsequently expected to be retired and the capital stock reduced accordingly.

ADR Program

The American Depositary Receipt (ADR) program grants global investors simplified access to Covestro shares. Covestro ADRs are traded over the counter in the United States under the COVTY ticker symbol. At the end of fiscal 2023, the total number of outstanding ADRs reached 7.4 million (previous year: 6.7 million).

Seven Analysts Issue Buy Recommendation for Covestro Shares

At the end of the year 2023, Covestro was covered by 14 securities brokers. Of these, seven analysts issued buy recommendations and seven were neutral. The average share price target was approximately €54 at the reporting date.