Covestro on the Capital Market

Performance of the Covestro Stock Versus the Market in the First Half of 2020

Performance of Covestro Stock Versus the Market in the First Half of 2020 (line chart)

Covestro closing prices Xetra; source: Bloomberg

Negative stock market performance in an unsettled environment

The macroeconomic situation worldwide has been marked by extreme uncertainty since the outbreak of the coronavirus pandemic. In the first half of 2020, major economies such as those of the United States, the European Union, and Japan contracted. Stock markets also experienced turbulence due to this development in the real economy in the first six months of 2020. Sharp declines in the first quarter of 2020 were followed in the second quarter by an uptick in some stock prices, although market participants remained very jittery. Many indices such as the EURO STOXX 50 posted negative performance overall in the first half of 2020. As of June 30, 2020, the DAX, which is relevant for Covestro, was down by 7.1% compared with its value at year-end 2019, while the STOXX Europe 600 Chemicals index declined 6.0% during the same period.

In this capital market environment, Covestro stock finished the first half of 2020 at a Xetra closing price of €33.85 — down by 18.3% from the end of 2019. On March 16, 2020, Covestro stock marked its low for the first six months of 2020 with a closing price of €24.90. The high for the first half of 2020 was €42.18 on January 2, 2020.

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Covestro closing prices Xetra; source: Bloomberg

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Annual General Meeting on July 30, 2020, and proposed dividend adjusted

Covestro AG had to delay the Annual General Meeting originally planned for April 17, 2020, in Bonn to a later date due to the rapid spread of the coronavirus at that time. The Annual General Meeting will now take place on July 30, 2020, and will be conducted as a virtual event for the first time in reaction to the changes in the legal environment.

Despite these economically challenging times, Covestro will continue to enable shareholders to take part in the company's success. On May 19, 2020, the Board of Management of Covestro AG voted to propose a dividend of €1.20 per share to the Annual General Meeting for fiscal 2019. The Board of Management had previously proposed a dividend of €2.40 per share to the Annual General Meeting on the originally scheduled date. The current focus of the Board of Management is on safeguarding liquidity and the company's credit rating. As stated in Covestro’s publications since the 2019 Annual Report, the Board of Management expects this fiscal year's earnings to be considerably lower than in the prior fiscal year due to the global coronavirus pandemic.

Moody's downgrades Covestro's rating

On October 7, 2015, one day after Covestro stock was listed on the Frankfurt Stock Exchange, Covestro AG received an investment-grade rating of Baa2 from London-based Moody's Investors Service. Moody's raised the company’s credit rating from Baa2 to Baa1 with stable outlook on July 30, 2018. On June 2, 2020, Moody's then revised our rating downward again from Baa1 back to Baa2 with negative outlook. Nevertheless, Covestro's credit rating remains firmly in the investment-grade range. In the future, Covestro intends to continue to maintain financing structures and financial ratios that support a solid investment-grade rating.

Successful placement of euro bonds

On June 5, 2020, Covestro successfully placed €1.0 billion in euro bonds on foreign debt markets. The bonds mature in February 2026 and June 2030 and carry coupon rates of 0.875% and 1.375%, respectively. Robust investor demand led to the placement volume being oversubscribed by more than ten times. The transactions enable Covestro to significantly extend the average maturity of the bond portfolio. The proceeds of the bond placement will be used to further reinforce Covestro's liquidity in view of the economic effects of the coronavirus pandemic and to provide funds to repay the existing bond maturing in fiscal 2021.

Thirteen analysts issue buy recommendation for Covestro stock

At the end of the first six months of 2020, Covestro was covered by 25 securities brokers. Thirteen analysts recommended the stock as a buy, nine were neutral, and three rated it as a sell. The average share-price target at the end of the period was €35.

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