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

Results of Operations

Covestro Group
Quarterly Sales

€ million

Covestro Group
Quarterly EBITDA

€ million

Second Quarter of 2023

In the second quarter of 2023, Group sales were down by 20.9% to €3,720 million (previous year: €4,703 million). This was mainly due to a significant drop in the selling price level, which had a negative impact on sales of 11.0%, as well as to lower volumes sold, with a lowering effect on sales of 8.0%. These trends were driven above all by the unfavorable global demand situation and availability constraints, especially in the EMLA region. In addition, exchange rate movements had a reducing effect on sales of 1.9%.

Both segments saw sales decline in the second quarter of 2023. Sales in the Performance Materials segment declined by 27.3% to €1,789 million (previous year: €2,461 million), while sales in the Solutions & Specialties segment were down 13.5% to €1,872 million (previous year: €2,165 million).

Sales by segment and region in the second quarter of 2023

€ million

In the EMLA region, sales were 26.3% lower, at €1,597 million (previous year: €2,167 million), and sales in the NA region were down 19.1% to €971 million (previous year: €1.200 million). The APAC region saw sales drop by 13.8% to €1,152 million (previous year: €1,336 million).

In the second quarter of 2023, the Group’s EBITDA decreased by 29.6% to €385 million (previous year: €547 million), mainly due to a demand-related decline in average selling prices, which lower raw material and energy prices were unable to offset. The resulting drop in margins and a reduction in volumes sold driven by demand and availability factors were among the key factors reducing earnings. Provisions for long-term variable compensation, which increased due to the share price performance, also had a negative effect. This was set against, among other factors, positive effects on earnings in an amount of €35 million from a decline in fixed costs and from the sale of the additive manufacturing business to Stratasys, a U.S.-Israeli manufacturer of 3D printers and 3D production systems.

Depreciation, amortization, impairment losses, and impairment loss reversals went down by 8.8% to €219 million in the second quarter of 2023 (previous year: €240 million), of which €198 million (previous year: €205 million) was attributable to property, plant and equipment and €21 million (previous year: €35 million) to intangible assets.

In the second quarter of 2023, the Covestro Group’s EBIT decreased by 45.9% to €166 million (previous year: €307 million).

Taking into account a financial result of €–36 million (previous year: €–44 million), income before income taxes fell to €130 million compared with the prior-year quarter (previous year: €263 million). The tax expense incurred in the second quarter of 2023 was €85 million (previous year: €65 million), resulting in income after taxes totaling €45 million (previous year: €198 million). After noncontrolling interests, net income amounted to €46 million (previous year: €199 million). Compared to the prior-year quarter, earnings per share fell to €0.24 (previous year: €1.04).

First Half of 2023

In the first half of 2023, Group sales were down by 20.5% to €7,463 million (previous year: €9,386 million). The decline was primarily due to a reduction in volumes sold driven by demand and availability factors, with a sales-reducing effect of 12.5%, and a lower selling price level, which had an adverse effect of 7.4%. Moreover, exchange rate movements had a negative impact of 0.6% on sales.

Both segments saw sales decline in the first half of 2023. In the Performance Materials segment, sales fell by 26.1% to €3,581 million (previous year: €4,849 million), while the Solutions & Specialties segment recorded a decrease of 14.4% to €3,755 million (previous year: €4,387 million).

Sales by segment and region in the first half of 2023

€ million

In the EMLA region, sales were 23.4% lower, at €3,247 million (previous year: €4,241 million), and sales in the NA region were down 15.7% to €1,953 million (previous year: €2,316 million). Sales in the APAC region decreased by 20.0% to €2,263 million (previous year: €2,829 million).

The Group’s EBITDA contracted by 50.4% to €671 million in the first half of 2023 compared with the prior-year period (previous year: €1,353 million). This was mainly attributable to a demand-related decline in the selling price level, which lower raw material and energy prices were unable to offset. In particular the resulting drop in margins and a reduction in volumes sold driven by demand and availability factors had a negative impact on earnings. Provisions for long-term variable compensation, which increased due to the share price performance, also reduced earnings. This was offset by earnings-enhancing effects arising from lower fixed costs, the above-mentioned sale of the additive manufacturing business, and a decline in provisions for short-term variable compensation.

Depreciation, amortization, impairment losses, and impairment loss reversals rose by 2.0% to €466 million in the first half of 2023 (previous year: €457 million), of which €409 million (previous year: €402 million) was attributable to property, plant and equipment and €57 million (previous year: €55 million) to intangible assets.

The Covestro Group’s EBIT was down 77.1% to €205 million in the first half of 2023 (previous year: €896 million).

Taking into account a financial result of €–65 million (previous year: €–72 million), income before income taxes went down to €140 million compared with the previous year (previous year: €824 million). After deduction of the tax expense of €122 million for the first half of 2023 (previous year: €209 million), income after taxes totaled €18 million (previous year: €615 million). After noncontrolling interests, net income amounted to €20 million (previous year: €615 million). In the first half of 2023, earnings per share decreased to €0.11 (previous year: €3.20).