Results of Operations and Financial Position of the Covestro Group

Results of Operations

Group sales grew by 7.3% in the third quarter of 2022, to €4,618 million (previous year: €4,302 million). Exchange rate movements had a positive effect of 7.6% on sales while a considerable increase in price levels, especially in the EMLA region, accounted for a 5.4% rise. The volumes sold, however, declined because of a downturn in demand, and this reduced sales by 5.7%, again affecting above all the EMLA region.

In the third quarter of 2022, sales rose by 6.6% to €2,330 million (previous year: €2,186 million) in the Performance Materials segment and by 6.1% to €2,196 million (previous year: €2,069 million) in the Solutions & Specialties segment. Sales increased in all three regions in the third quarter of 2022. In the EMLA region, sales climbed by 3.0% to €1,841 million (previous year: €1,787 million). Sales rose by 24.7% to €1,261 million (previous year: €1,011 million) in the NA region, and by 0.8% to €1,516 million (previous year: €1,504 million) in the APAC region.

Sales by segment and region

€ million

The Group’s EBITDA declined by 65.0% to €302 million in the third quarter of 2022 (previous year: €862 million), primarily due to lower margins. They resulted from a considerable rise in raw material and energy prices, offset only to a small extent by the higher selling price level. The reduction in total volumes sold also led to lower earnings. In contrast, lower provisions for variable compensation, business development subsidies in a mid-double-digit million euro amount received in China, and positive currency effects had a beneficial effect on EBITDA.

EBITDA in the Performance Materials segment decreased by 92.5% to €53 million (previous year: €708 million). In contrast, EBITDA rose by 26.7% to €280 million (previous year: €221 million) in the Solutions & Specialties segment.

The Covestro Group’s EBIT was down by 89.9% to €66 million in the third quarter of 2022 (previous year: €654 million).

Financial Position

Cash flows from operating activities totaled €246 million in the third quarter of 2022 (previous year: €564 million). The lower cash inflows year-over-year are mainly due to the decline in EBITDA. Cash tied up in working capital in the prior-year quarter is set against cash freed up in the quarter under review, which had a positive effect. Lower income tax payments also had a positive effect.

Free operating cash flow was down, amounting to €33 million in the third quarter of 2022 (previous year: €381 million), largely due to lower cash flows from operating activities.

The Covestro Group’s financial debt amounted to €3,168 million on September 30, 2022, an increase of €661 million compared with December 31, 2021, due in particular to the €454 million increase in liabilities to banks. Other financial liabilities were up due to the issuance of commercial paper of €150 million under the European Commercial Paper Program (ECPP).

Cash and cash equivalents declined in comparison with the figure on December 31, 2021, by €357 million to €292 million. This is mainly attributable to dividend payments of €653 million and cash outflows of €543 million for additions to property, plant, equipment and intangible assets. Cash and cash equivalents also decreased because of the purchase of treasury shares worth €150 million in connection with the share buyback program in the first half of 2022. In contrast, net cash inflows of €484 million from an increase in liabilities and cash inflows of €131 million from operating activities increased cash and cash equivalents. In addition, net proceeds of short-term bank deposits maturing in an amount of €373 million and cash inflows of €65 million from the net sale of money market fund units also increased this item. At the same time, they reduced current financial assets by €438 million to €15 million.

Net financial debt therefore grew by €1,456 million compared with the figure on December 31, 2021, to €2,861 million as of September 30, 2022.