Net Assets and Financial Position of the Covestro Group

Cash flows from operating activities

In the second quarter of 2019, cash flows from operating activities declined to €164 million (previous year: €517 million). Reduced EBITDA was the key reason for this development. However, income tax payments were lower. After deduction of cash outflows for additions to property, plant, equipment and intangible assets, free operating cash flow totaled minus €55 million (previous year: €364 million).

In the first half of 2019, cash flows from operating activities amounted to €284 million, down from the previous year’s figure of €969 million. After deduction of cash outflows for additions to property, plant, equipment, and intangible assets totaling €384 million (previous year: €241 million), free operating cash flow was minus €100 million (previous year: €728 million).

Cash flows from investing activities

In the second quarter of 2019, cash outflows for investing activities totaled €184 million (previous year: cash outflows €65 million). Cash outflows for additions to property, plant and equipment and intangible assets totaling €219 million (previous year: €153 million) stood in contrast to cash inflows from items such as maturing bank deposits.

Cash outflows for investing activities in the first half of 2019 totaled €373 million (previous year: cash outflows €35 million). These mainly included cash outflows for additions to property, plant and equipment and intangible assets of €384 million (previous year: €241 million).

Cash flows from financing activities

The Covestro Group saw cash outflows for financing activities amounting to €109 million in the second quarter of 2019 (previous year: cash outflows €903 million). The Covestro AG dividend paid in April 2019 totaled €438 million, while cash received from issuance of debt stood at €440 million. Additional cash outflows comprised debt repayments in the amount of €87 million and interest payments of €21 million.

Cash outflows for financing activities in the first half of 2019 totaled €143 million (previous year: cash outflows €1,692 million).

In comparison with December 31, 2018, the Covestro Group’s net financial debt increased by €1,256 million to reach €1,604 million as of June 30, 2019. The rise in financial debt stemmed largely from the initial application of IFRS 16 and the resulting increase in lease liabilities as well as the assumption of short-term loans. Furthermore, cash and cash equivalents decreased by €225 million to €640 million.

Total assets grew by €577 million compared with December 31, 2018, rising to €11,661 million as of June 30, 2019.

Noncurrent assets rose €811 million to €6,612 million, primarily due to an increase in property, plant and equipment, which chiefly resulted from the initial application of IFRS 16. Current assets decreased by €234 million to €5,049 million. This resulted mainly from a reduction in cash and cash equivalents and inventories, which stood in contrast to higher income tax refund claims and an increase in assets held for sale.

Compared with December 31, 2018, equity declined €170 million to €5,205 million. The drop was attributable to the dividend distribution, which was not offset by income after income taxes.

Liabilities were up €747 million, totaling €6,456 million as of June 30, 2019. Provisions for pensions and other post-employment benefits increased by €259 million to €1,704 million. Noncurrent financial liabilities grew by €536 million to €1,702 million, a change mostly attributable to the increase in lease liabilities resulting from the initial application of IFRS 16. Current financial liabilities increased €493 million to €552 million, mainly due to the assumption of short-term loans.