Forecast
Economic outlook
Global economy
The grave consequences of the spread of the coronavirus pandemic will have a substantial negative impact on the global economy. In contrast with our outlook in the 2019 Annual Report, we now project global economic output to drop significantly for a decline in growth of 5.6% for 2020 as a whole. The expectations for all regions were revised sharply downward. According to current estimates, we expect only China to post positive, albeit weak, growth. The economies in Europe, North America and Latin America are forecast to report negative growth rates. After two quarters of recession in the first half of 2020, we expect the global economy to grow again compared with the prior-year quarters in the second half of 2020.
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Growth 2019 |
Growth forecast 2020 |
Growth forecast 2020 |
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% |
% |
% |
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World |
+2.5 |
+2.5 |
–5.6 |
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Europe |
+1.5 |
+1.2 |
–8.5 |
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of which Western Europe |
+1.3 |
+0.9 |
–8.8 |
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of which Germany |
+0.6 |
+0.4 |
–6.0 |
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of which Eastern Europe |
+2.7 |
+2.4 |
–7.3 |
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Middle East |
+0.7 |
+2.0 |
–8.5 |
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Latin America |
–0.4 |
+0.9 |
–9.7 |
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Africa |
+2.5 |
+2.9 |
–3.6 |
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North America2 |
+2.1 |
+1.9 |
–6.4 |
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of which United States |
+2.3 |
+2.1 |
–6.1 |
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Asia-Pacific |
+4.2 |
+4.2 |
–2.1 |
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of which China |
+6.1 |
+5.8 |
+0.5 |
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Main customer industries*
We expect the coronavirus pandemic to also have a significant adverse impact on the performance of our main customer industries. Unlike our outlook in the 2019 Annual Report, we now believe the automotive industry will see a steep downturn amounting to a double-digit percentage. Growth in the furniture industry will also likely be considerably weaker than expected. In the electrical, electronics and household appliances industry as well as the construction sector, we project a negative growth rate in the lower single-digit range, down from our forecast in the 2019 Annual Report.
* Covestro’s estimate, based on the following sources: LMC Automotive Limited, B+L, CSIL (Centre for Industrial Studies), Oxford Economics Economic data is only available for the automotive and furniture segments (not the transportation or wood processing segments) of our “automotive and transportation” and “furniture and wood processing” main customer industries.
Forecast for key performance indicators
As a result of the coronavirus pandemic and the resulting increasingly unfavorable business environment, the Board of Management of Covestro AG adjusted the forecasts in the 2019 Annual Report on April 15, 2020. Based on the business performance described in this Half-Year Financial Report and the aforementioned economic outlook, and taking into consideration the changed risk and opportunity potentials, we confirm the compared to the 2019 Annual Report adjusted forecast for the rest of the 2020 fiscal year.
We expect our key performance indicators to develop as follows.
In the current year, core volume growth is projected to decline year over year (forecast in the 2019 Annual Report: low-single-digit percentage range increase).
Free operating cash flow (FOCF) is expected to be in the range between minus €200 million and plus €300 million this year (forecast in the 2019 Annual Report: between €0 million and €400 million).
For fiscal 2020, return on capital employed* (ROCE) is projected between minus 1% and plus 4% (forecast in the 2019 Annual Report: between 2% and 7%).
* 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.