Forecast
Economic Outlook
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Growth1 2018 |
Growth1 forecast 2019 (2018 Annual Report) |
Growth1 forecast 2019 |
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% |
% |
% |
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World |
+3.1 |
+2.8 |
+2.7 |
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European Union |
+2.0 |
+1.3 |
+1.3 |
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of which Germany |
+1.5 |
+1.0 |
+0.5 |
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NAFTA |
+2.7 |
+2.4 |
+2.4 |
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of which United States |
+2.9 |
+2.5 |
+2.6 |
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Asia-Pacific |
+4.8 |
+4.7 |
+4.5 |
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of which China |
+6.6 |
+6.3 |
+6.2 |
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We expect global economic growth of 2.7% for 2019, slightly weaker than our outlook in the 2018 Annual Report. The current assessment of developments in the Asia-Pacific region has clouded somewhat, whereas assessments for the NAFTA region and the European Union remain unchanged. The expectation for Germany has, however, been significantly scaled back. Overall, we expect to see ongoing difficult economic conditions due to such issues as political uncertainties in Europe and increasing trade barriers.
Main customer industries1
Compared with the expectations we expressed in the 2018 Annual Report, we so far see only minor changes, or none at all, for the performance of the construction sector industry, assuming no further global trade barriers. Growth in the furniture industry is anticipated to be somewhat weaker than presented in the 2018 Annual Report. We expect a significant decline for the electrical and electronics industry and, in particular, for the automotive industry.
Forecast for Key Data
On the basis of the business performance described in this report, along with our consideration of the potential associated risks and opportunities, we confirm the forecast for key data made in both the 2018 Annual Report and the Quarterly Statement as of March 31, 2019, for the rest of the 2019 fiscal year.
We expect core volume growth in the low-to-mid-single-digit-percentage range. This projection applies to the Covestro Group as well as to the Polyurethanes, Polycarbonates and Coatings, Adhesives, Specialties segments.
In fiscal year 2019, we anticipate free operating cash flow (FOCF) of between €300 million and €700 million. For the Polyurethanes segment, we project an increase in cash outflows for additions to property, plant, equipment and intangible assets, which will exceed the expected net cash provided by operating activities. FOCF is anticipated to decline in the Polycarbonates segment as well, although the trend here will likely be much more positive than for the Group as a whole. For the Coatings, Adhesives, Specialties segment, we expect FOCF around the prior-year level.
For 2019, we expect ROCE2 of between 8% and 13%.
1 Covestro’s estimate, based on the following sources: LMC Automotive Limited, B+L, CSIL (Centre for Industrial Studies), Oxford Economics
2 ROCE: The return on capital employed is calculated as the ratio of EBIT after taxes to capital employed. Capital employed is the capital used by the company. It is the sum of current and noncurrent assets less noninterest-bearing liabilities such as trade accounts payable. Starting in fiscal year 2019, assets held for sale and the associated liabilities are also included in the calculation of capital employed.