Results of Operations and Financial Position of the Covestro Group

Results of Operations

Group sales were down 20.1% in the first quarter of 2023, to €3,743 million (previous year: €4,683 million). The decline in sales was due to lower volumes sold and this had a lowering effect on sales of 16.8%, especially because of weaker demand and availability constraints in the EMLA region. Another factor was the lower selling price level, which had a reducing effect of 3.9% on sales, affecting especially the APAC and NA regions. Exchange rate changes had a positive effect on sales, increasing them by 0.6%.

In the first quarter of 2023, sales decreased by 25.0% to €1,792 million (previous year: €2,388 million) in the Performance Materials segment and by 15.3% to €1,883 million (previous year: €2,222 million) in the Solutions & Specialties segment. Sales were down in all three regions in the first quarter of 2023. In the EMLA region, sales fell by 20.4% to €1,650 million (previous year: €2,074 million). Sales went down by 12.0% to €982 million (previous year: €1,116 million) in the NA region, and by 25.6% to €1,111 million (previous year: €1,493 million) in the APAC region.

Sales by segment and region

€ million, prior-year figures in brackets

The Group’s EBITDA declined by 64.5% to €286 million in the first quarter of 2023 (previous year: €806 million), primarily due to a reduction in volumes sold driven by demand and availability factors. A decline in average selling prices for demand-related reasons, combined with a rise in raw material prices, led to lower margins, which in turn contributed to lower earnings. In contrast, a decline in provisions for variable compensation had a beneficial effect on EBITDA, while exchange rate movements did not have any notable effect.

EBITDA decreased by 72.1% to €173 million (previous year: €620 million) in the Performance Materials segment and by 26.3% to €165 million (previous year: €224 million) in the Solutions & Specialties segment.

The Covestro Group’s EBIT was down 93.4% to €39 million in the first quarter of 2023 (previous year: €589 million).

Financial Position

In the first quarter of 2023 cash outflows for operating activities amounted to €19 million (previous year: inflows of €157 million), driven primarily by the decline in EBITDA. This was partially offset by a smaller amount of cash tied up in working capital than in the prior-year quarter as well as lower income tax payments.

Free operating cash flow was down, amounting to €–139 million in the first quarter of 2023 (previous year: €17 million), largely due to lower cash flows from operating activities.

The Covestro Group’s financial debt amounted to €3,826 million on March 31, 2023, an increase of €179 million compared with December 31, 2022, due in particular to the €114 million increase in liabilities to banks.

Cash and cash equivalents declined in comparison with the figure on December 31, 2022, by €249 million to €949 million. This was mainly the result of net investments of €187 million in short-term bank deposits, cash outflows of €120 million for additions to property, plant, equipment and intangible assets, and net cash outflows from operating activities of €19 million. This was set against cash inflows from the issuance of Schuldschein loans in an amount of €100 million. The net investments in short-term bank deposits mentioned earlier led to an increase in current financial assets by €187 million to €202 million.

Net financial debt therefore grew by €241 million compared with the figure on December 31, 2022, to €2,675 million as of March 31, 2023.