Results of Operations and Financial Position of the Covestro Group

Results of Operations

Group sales declined by 22.7% in the third quarter of 2023, to €3,568 million (previous year: €4,618 million). The decrease in sales was mainly due to a lower selling price level in all regions, which had a decreasing effect on sales of 14.3%. In addition, there was a decline in volumes sold, especially in the NA and EMLA regions, with a negative effect on sales of 3.8%. Both trends were driven above all by the unfavorable global demand situation. Exchange rate movements also had a negative impact on sales, amounting to 4.6%.

In the third quarter of 2023, sales decreased by 26.7% to €1,707 million (previous year: €2,330 million) in the Performance Materials segment and by 17.6% to €1,809 million (previous year: €2,196 million) in the Solutions & Specialties segment. Sales were down in all three regions in the third quarter of 2023. In the EMLA region, sales fell by 24.7% to €1,387 million (previous year: €1,841 million). Sales went down by 25.8% to €936 million (previous year: €1,261 million) in the NA region, and by 17.9% to €1,245 million (previous year: €1,516 million) in the APAC region.

Sales by segment and region

€ million, prior-year figures in brackets

The Group’s EBITDA was down 8.3% to €277 million in the third quarter of 2023 (previous year: €302 million). In addition to exchange rate movements, a decrease in volumes sold due to lower demand had a negative effect on EBITDA. Furthermore, changes in provisions for short- and long-term variable compensation and a smaller amount of business development subsidies received in China than in the prior-year quarter contributed to the reduction in EBITDA. In contrast, higher margins boosted earnings, since the decline in the selling price level was more than offset by lower raw material and energy prices. Another factor was that lower selling and administrative expenses and a decrease in fixed cost of goods sold also pushed up earnings.

EBITDA increased by 60.4% to €85 million (previous year: €53 million) in the Performance Materials segment and declined by 12.1% to €246 million (previous year: €280 million) in the Solutions & Specialties segment.

The Covestro Group’s EBIT improved by 7.6% to €71 million in the third quarter (previous year: €66 million).

Financial Position

Cash flows from operating activities in the third quarter of 2023 amounted to €490 million (previous year: €246 million), driven primarily by funds freed up from working capital, compared with funds tied up in the prior-year quarter. In contrast, higher income tax payments, mainly because of back tax payments, and a reduction in EBITDA had an adverse impact on cash flows from operating activities.

Free operating cash flow was up, amounting to €308 million in the third quarter of 2023 (previous year: €33 million), largely due to higher cash flows from operating activities.

In comparison with December 31, 2022, the Covestro Group’s financial debt rose by €21 million to €3,668 million as of September 30, 2023. In addition to a €21 million decline in receivables from derivatives, this was attributable to a rise of €17 million in lease liabilities. Offsetting effects included in particular the €14 million decrease in liabilities to banks.

Cash and cash equivalents declined in comparison with the figure on December 31, 2022, by €146 million to €1,052 million. This was mainly due to cash outflows for additions to property, plant and equipment and intangible assets of €461 million, cash flows from financing activities of €276 million, and net outflows for short-term bank deposits of €101 million. Conversely, higher cash flows from operating activities led to a €620 million increase in cash and cash equivalents. The net cash outflows for short-term bank deposits drove up current financial assets by €101 million to €116 million.

Net financial debt therefore grew by €66 million compared with the figure on December 31, 2022, to €2,500 million as of September 30, 2023.