Business Development of Covestro Group
Results of operations
In the first quarter of 2019, the Group’s core volumes declined by 1.8%, mainly due to lower volumes in the Polycarbonates segment, which were down by 6.3% from the prior-year period. Volumes in the Polyurethanes (–0.2%) and Coatings, Adhesives, Specialties (–0.1%) segments remained around the level of the prior-year quarter.
Group sales amounted to €3,175 million, down by 16.0% from the prior-year quarter (previous year: €3,779 million). The main factor here was the decline in selling prices, which had a negative impact of 18.3% on sales. This development was attributable to the Polyurethanes and Polycarbonates segments, whereas the trend in average selling prices in the Coatings, Adhesives, Specialties segment had a positive effect of 1.7% on sales. Total volumes sold impacted sales, which increased by 0.9%. Exchange rate movements had a positive impact of 2.4%. The change in the portfolio resulting from the sale of the U.S. sheets business in the Polycarbonates segment in the third quarter of 2018 impacted sales, which dipped by 1.0%.
In the first quarter of 2019, lower sales were attributable to the Polyurethanes and Polycarbonates segments. Sales in the Polyurethanes segment dropped by 24.3% to €1,476 million (previous year: €1,950 million), and in the Polycarbonates segment they were down by 16.7% to €860 million (previous year: €1,033 million). In the Coatings, Adhesives, Specialties segment, sales increased by 5.9% to €627 million (previous year: €592 million).
The Group's EBITDA declined by 58.4% to €442 million in the first quarter of 2019 (previous year: €1,063 million), in particular due to significantly lower margins. In contrast, higher volumes, a decrease in provisions for short-term, variable compensation, and the effects of applying the new financial reporting standard IFRS 16 Leases had a positive effect on EBITDA.
EBITDA in the Polyurethanes segment dropped by 75.4% to €157 million (previous year: €637 million), and in the Polycarbonates segment it was down by 48.8% to €155 million (previous year: €303 million). In the Coatings, Adhesives, Specialties segment, EBITDA rose by 7.4% to €146 million (previous year: €136 million).
In the first quarter of 2019, the Covestro Group’s EBIT was down by 70.9% to €264 million (previous year: €907 million).
Financial position
Operating cash flows decreased to €120 million from the prior-year quarter (previous year: €452 million), largely due to the significant drop in EBITDA. In contrast, the reduction in funds tied up in working capital had a positive effect.
Free operating cash flow declined to minus €45 million in the first quarter of 2019 (previous year: €364 million). This was mainly due to lower cash outflows from operating activities and the planned increase in cash outflows for additions to property, plant, equipment and intangible assets.
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Dec. 31, 20182 |
Mar. 31, 2019 |
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€ million |
€ million |
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Bonds |
996 |
996 |
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Liabilities to banks |
24 |
28 |
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Lease liabilities3 |
193 |
834 |
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Liabilities from derivatives |
12 |
22 |
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Other financial liabilities |
– |
12 |
|||||||||
Receivables from derivatives |
(12) |
(22) |
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Financial liabilities |
1,213 |
1,870 |
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Cash and cash equivalents |
(865) |
(771) |
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Current financial assets |
– |
(40) |
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Net financial debt |
348 |
1,059 |
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In comparison with December 31, 2018, the Covestro Group’s net financial debt increased by €711 million to reach €1,059 million as of March 31, 2019. This rise was mainly attributable to the initial application of the IFRS 16 financial reporting standard and the resulting increase in lease liabilities. The decrease in cash and cash equivalents is chiefly the result of higher cash outflows for additions to property, plant, equipment and intangible assets, which exceeded net cash provided by operations. In addition, an investment was made in short-term bank deposits.