Notes to the Consolidated Financial Statements of the Covestro Group – Principles and Methods

5. Changes in the Scope of Consolidation

5.1  Scope of Consolidation and Investments

As of December 31, 2023, the scope of consolidation comprised Covestro AG and 57 (previous year: 60) consolidated companies.

The decrease in the number of consolidated companies in fiscal 2023 is due on the one hand to the sale of Covestro Resins (Taiwan) Ltd., Taipei (Taiwan, Greater China), which was successfully completed on May 31, 2023, and on the other to the intragroup mergers of consolidated companies Covestro Intellectual Property GmbH & Co. KG, Leverkusen (Germany), and Covestro Procurement Services GmbH & Co. KG, Leverkusen (Germany), with Covestro Deutschland AG, Leverkusen (Germany), effective September 1, 2023.

The scope of consolidation included the joint operation LyondellBasell Covestro Manufacturing Maasvlakte V.O.F, Rotterdam (Netherlands), as of December 31, 2023, which is unchanged from the previous year. Pursuant to IFRS 11 (Joint Arrangements), Covestro’s shares of this company’s assets, liabilities, revenues, and expenses are included in the consolidated financial statements in accordance with Covestro’s rights and obligations. The main purpose of LyondellBasell Covestro Manufacturing Maasvlakte V.O.F is the joint production of propylene oxide (PO) for Covestro and its partner LyondellBasell.

Additionally, two (previous year: two) associated companies are accounted for in the consolidated financial statements using the equity method.

Six (previous year: eight) subsidiaries and two (previous year: two) associated companies that in aggregate are immaterial to the Covestro Group’s net assets, financial position, and results of operations are not consolidated or accounted for using the equity method, but recognized at cost. As in the previous year, the immaterial subsidiaries each accounted for no more than 0.1% of Group sales, equity, or total assets in the reporting year 2023.

The information on the companies included in the consolidated financial statements and on the Covestro Group’s shareholdings pursuant to Section 313 (2) of the German Commercial Code (HGB) and the list of domestic subsidiaries that made use of the exemption provisions pursuant to Sections 264 (3) and 264b of the German Commercial Code (HGB) in fiscal 2023 are components of the consolidated financial statements submitted for publication to Germany’s Federal Gazette (Bundesanzeiger).

The disclosures on shareholdings in accordance with the requirements of Section 313 (2) HGB are shown in the following tables. The interests held in the companies listed did not change compared with the previous year.

According to IFRS 10 (Consolidated Financial Statements), Covestro’s interest in the amount of 50% in Covestro Eternal Resins (Kunshan) Co., Ltd., Kunshan (China), is classified as a fully consolidated company due to the 57% share of voting rights.

In addition, the following joint operation have been included in the consolidated financial statements in line with Covestro’s shares of its assets, liabilities, revenues and expenses:

The following associated companies are accounted for in the consolidated financial statements using the equity method:

The following subsidiaries were reflected in the consolidated financial statements at amortized cost due to their immateriality:

The following associated companies were recognized at cost due to their immateriality:

The following fully consolidated domestic subsidiaries made use of the exemption provisions pursuant to Section 264 (3) of the German Commercial Code (HGB) and Section 264b of the German Commercial Code (HGB) in fiscal 2023:

5.2  Acquisitions and Divestitures

Acquisitions

No reportable acquisitions were made in the reporting year 2023.

Divestitures

On April 3, 2023, the sale of assets and liabilities (disposal group) of the additive manufacturing business to Stratasys, a U.S.-Israeli manufacturer of 3D printers and 3D production systems, was successfully completed. The business sold by Covestro includes employees, research and development facilities, production units, and offices in the Netherlands, the United States, China, Japan, Germany, and the United Kingdom as well as access to a large network of partners around the world. The portfolio also includes products that are part of the Resins & Functional Materials business (RFM) acquired from Koninklijke DSM N.V., Heerlen, (Netherlands), in fiscal 2021. The additive manufacturing business, which is part of the Solutions & Specialties segment, offers material solutions for common polymer 3D printing processes. Covestro’s decision to sell the additive manufacturing business is consistent with the optimization of its portfolio to make its organization more efficient and allow the company to sharpen its focus on the extensive range of offerings for customers in its main customer industries. The preliminary selling price of €54 million was received in full. This comprises cash transferred in the amount of €50 million and 317,505 Stratasys shares, which were sold for a net amount of €4 million. In addition, a variable earn-out payment has been agreed, which will depend on the achievement of various success factors; the amount will be finally determined in the year 2025. The transaction is structured as an asset deal. Noncurrent assets and inventories of €21 million as well as liabilities of €2 million were sold as part of this transaction. The net gain of €35 million on the disposal of this business was recognized in other operating income or expenses.