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

18. Equity

The individual components of equity and changes in equity in fiscal years 2022 and 2023 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 €2.0 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 2023:

Covestro AG’s capital stock as of December 31, 2023, is divided into 189,000,000 (previous year: 193,200,000) no-par value bearer shares and is fully paid up. Each share confers the right to one vote.

By resolution of the Board of Management on December 5, 2023, the registered capital stock was reduced by €4 million, from €193 million to €189 million, through the retirement of 4,200,000 no-par value bearer shares, with a notional value of €1 per share.

In the year 2023, Covestro AG bought back 1,208,035 treasury shares under the share buyback program, which was terminated in October 2023. In the period March 21, 2022, to June 29, 2023, Covestro AG therefore acquired a total of 4,687,991 treasury shares as part of the overall share buyback program. In contrast to the previous year, Covestro AG did not issue any treasury shares (previous year: 228,321) to employees as part of the Covestment share-based participation program. There was a capital decrease in December 2023 through the retirement of 4,200,000 shares. As of December 31, 2023, the company held 259,670 treasury shares (previous year: 3,251,635), corresponding to 0.1% of the capital stock.

The cost of acquiring the treasury shares held by Covestro AG at the end of the fiscal year came to €12 million. Measurement was carried out according to the FIFO method. The average price paid per share for the entire share buyback program was €42.50 per share.

Capital Reserves

Covestro AG’s capital reserves as of December 31, 2023, amounted to €3,740 million (previous year: €3,788 million). The year-over-year decline was attributable to the acquisition of treasury shares (€48 million) as part of the share buyback program.

The capital reserves include premiums from the issue of shares.

Retained Earnings and Other Comprehensive Income

Retained earnings totaled €2,291 million (previous year: €2,480 million) as of December 31, 2023.

Retained earnings consist of the net income earned both in the current fiscal year and in the past less the dividends paid. This item also includes all remeasurements of the net defined benefit liability for post-employment benefit plans recognized in other comprehensive income and changes in equity instruments measured at fair value through 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). Since the 2020 annual financial statements, Covestro AG’s dividend policy has been more closely linked to the Group’s overall business situation and specifies that Covestro AG will distribute a portion of the Group’s net income to shareholders of Covestro AG. Since the Group again generated negative net income, no dividend will be paid to Covestro AG shareholders for fiscal 2023, as for fiscal 2022, in accordance with the current dividend policy. As a result, in the year 2023, no dividend was paid for fiscal 2022 per share carrying dividend rights.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income was as follows:

Equity Attributable to Noncontrolling Interests

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

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