Significant Events

War in Ukraine

The Russian war against Ukraine, which began in February 2022, has had a notable impact on the global economy. The global consequences for the energy and raw material markets and on supply chains also influenced Covestro’s business situation. In the first half of 2022, production at Covestro was not affected by the reductions in gas supplies from Russia implemented to date. However, there is uncertainty about future supplies, in particular since further significant cuts in, or a suspension of, gas supplies from Russia could have considerable consequences for Covestro’s European sites, especially in Germany. There is no short-term substitute for gas in Covestro’s production processes, where it is predominantly used as a source of energy and as process gas in chemical reactions. As in the previous year, less than 1% of Group sales are generated in the countries affected by the war, Russia, Belarus, and Ukraine, combined. The existing trade accounts receivable from customers in these countries were evaluated and impaired, if needed. Covestro does not operate any production sites in any of the three countries. The sanctions imposed on Russia and Belarus by the international community therefore only minimally affect Covestro’s business.
See “Opportunities and Risks.”

In March 2022, Covestro reacted to the humanitarian crisis in Ukraine and its neighboring countries by donating aid for this purpose. We have made available €250,000 to UNO-Flüchtlingshilfe, the German partner organization to the United Nations High Commissioner for Refugees (UNHCR). Covestro has also provided its companies in Slovakia and Poland an additional €40,000 for local aid organizations.

Coronavirus Pandemic

Strict measures to curb the spread of the coronavirus pandemic, most of which were imposed by the Chinese government, impacted on the global economy in the first half of 2022. Production at Covestro’s sites continued to be unaffected by the pandemic, although logistical bottlenecks emerged at the Shanghai (China) site in the course of the first half of 2022. This also had significant effects on business performance in the APAC region. The health, safety, and hygiene measures implemented by Covestro are regularly reviewed and modified to address current conditions. Employees in the EMLA and NA regions were gradually returning to the workplace. Especially in China, part of the workforce, particularly employees in administrative departments, worked from home due to the restrictions described earlier.

CEO Dr. Markus Steilemann’s Contract Extended

The Supervisory Board has 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. Steilemann has been a member of Covestro’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.

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 first half of 2022, Covestro AG had acquired 3,479,956 shares valued at €150 million in two tranches.
Additional information is available at: www.covestro.com/en/investors/share-performance/share-buyback

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 GHG emissions from its own production activities (Scope 1) and indirect GHG emissions from external energy sources (Scope 2). The Group is striving to become climate-neutral and to reach net-zero greenhouse gas (GHG) emissions* by the year 2035. The company plans to reduce Scope 1 and Scope 2 GHG emissions by 60% 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.

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 environmental, social, and governance (ESG) rating. In May 2022, Covestro 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).
See “Financial Management” in the Annual Report 2021 and further information at: www.covestro.com/en/investors/debt/green-financing-framework