Covestro closes financial year 2021 successfully by more than doubling its EBITDA

#Covestro #Circulareconomy #SustainableFuture #MarkusSteilemann

“Our very good results in fiscal 2021 underscore once more that we are on the right track with our new strategic setup. Now we are taking the next steps on our path to a profitable and climate neutral future. After all, one thing is clear: Without our products, the Paris Agreement’s 1.5 degrees target cannot be achieved.” - Dr. Markus Steilemann, CEO of Covestro

March 2022: Covestro had a successful fiscal year 2021. The Group benefited from strong global demand and buoyant earnings in the year as a whole. Core volumes sold increased by 10 percent year on year, mainly due to additional volumes from the Resins & Functional Materials (RFM) business acquired from DSM. In particular, the rise in selling prices on the back of high demand meant that Group sales increased by 48.5 percent to EUR 15.9 billion (previous year: EUR 10.7 billion) – the highest ever level in Covestro’s history.

EBITDA more than doubled year over year and was EUR 3.1 billion in fiscal 2021 (previous year: EUR 1.5 billion), in particular as a result of far higher margins. Net income more than tripled year over year to EUR 1.6 billion (previous year: EUR 459 million), while the free operating cash flow (FOCF) was EUR 1.4 billion and likewise well up on the previous year’s figure of EUR 530 million. The return on capital employed (ROCE) grew to 19.5 percent (previous year: 7.0 percent).

“In the past year we successfully undertook further steps towards a circular economy. Our very good results in fiscal 2021 underscore once more that we are on the right track with our new strategic setup,” said Dr. Markus Steilemann, CEO of Covestro. “Now we are taking the next steps on our path to a profitable and climate neutral future. After all, one thing is clear: Without our products, the Paris Agreement’s 1.5 degrees target cannot be achieved.”

After presenting its new strategy ‘Sustainable Future’ in February 2021, Covestro achieved important milestones in implementing it in the course of the fiscal year. The strategy has customer centricity and sustainable growth at its core. As part of that, the Group restructured its organization in July 2021 and focused its businesses even more closely on the requirements of individual markets and on customers’ needs. Covestro has since been divided into the two reportable segments Performance Materials and Solutions & Specialties.

Integration of the Resins & Functional Materials business acquired from DSM in the Solutions & Specialties segment is proceeding successfully. The company was thus already able to generate synergy effects of EUR 26 million, almost twice the figure originally anticipated for 2021. Covestro expects to generate permanent synergies totaling around EUR 120 million annually by 2025.

Given its very good performance in fiscal 2021, Covestro plans to propose a dividend of EUR 3.40 per share to the Annual General Meeting on April 21, 2022. That is equal to a payout ratio of 41 percent. Covestro redefined its dividend policy last fiscal year. It envisages a payout ratio between 35 and 55 percent of net income in order to create a stronger link to the Group’s overall business situation.

“We can look back on an extremely successful year marked by high demand. Not least, that is reflected in the fact that we were virtually sold out over large stretches of 2021,” said Dr. Thomas Toepfer, CFO of Covestro. “In the past year we have created the foundation for further sustainable growth with our new Group structure.”

In light of the successful business development, Covestro’s Board of Management has also resolved on a share buyback program with a total volume of approximately EUR 500 million over the next two years. The repurchased shares are subsequently to be cancelled and the share capital is to be reduced accordingly. “Major acquisitions are not Covestro’s focus at the moment; instead, we believe investing in our own shares is the best investment,” Dr. Thomas Toepfer continued. “We are convinced of our company and want to create additional value for our shareholders.”

Covestro is making systematic advances on its path to circular plastics production and has set bold climate targets. The Group is striving to become climate neutral and achieve net zero* emissions by 2035. On the path to achieving that, Covestro has already reduced its specific greenhouse gas emissions per metric ton of product produced by 54 percent in 2021 compared to 2005, achieving its sustainability target for 2025 already today.

Now, the company plans to cut greenhouse gas emissions from its own production operations (scope 1) and from external energy sources (scope 2) by 60 percent to 2.2 million metric tons by 2030. In the long run, Covestro aims to use renewable energies only, such as wind power and solar energy, as well as alternative raw materials such as biomass, waste, CO2 or hydrogen within its production processes. In addition, a reduction target for the long-term reduction of indirect greenhouse gas emissions from upstream and downstream processes in the value chain (scope 3) is to follow in 2023.

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