● Group sales climbed to EUR 4.7 billion (+41.6%)

● EBITDA at EUR 806 million (+8.5%)

● Net profit reached EUR 416 million (+5.9%)

● Free operating cash flow of EUR 17 million (–94.7%)

● Continue to move towards a circular economy and climate neutrality

● Cut 2022 earnings forecast

Thanks to continued strong demand in the first three months of the year, Covestro is off to a successful start in fiscal 2022. Compared to the same quarter last year, Group sales rose by 41.6% to EUR 4.7 billion (previous year: EUR 3.3 billion), especially thanks to higher average selling prices. Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter increased by 8.5% year-on-year to EUR 806 million (previous year: EUR 743 million), due, among other factors, to the positive impact of foreign exchange rates and An increase in total sales. The sharp rise in raw material and energy prices was largely offset by higher selling price levels. Free operating cash flow (FOCF) decreased by 94.7% to EUR 17 million, due to lower cash inflows from operating activities (prior year: EUR 318 million) as more cash was taken up by price-driven working capital. Net profit in the first quarter of 2022 increased by 5.9% to EUR 416 million (previous year: EUR 393 million).

Dr. Markus Steilemann, CEO of Covestro, said: "We are off to a successful start to the new fiscal year. However, we recognize that political and economic uncertainty is growing, especially considering Ukraine war. Given the current situation, it is clear more than ever that we need to reduce our long-term reliance on fossil raw materials. The sustainable transformation of industry cannot be achieved without the chemical industry, and Covestro is just for that. part of the solution."

Cut 2022 profit forecast

On 2 May 2022, Covestro downgraded the downgrade in light of China's lockdown measures in response to the COVID-19 outbreak (especially in Shanghai and surrounding areas), further sharply higher energy and raw material costs, and expectations of a slowdown in global economic growth. Earnings guidance for fiscal 2022. The Group now expects full-year EBITDA to be between EUR 2 billion and EUR 2.5 billion (previously expected to be between EUR 2.5 billion to EUR 3 billion) and free operating cash flow between EUR 400 million to EUR 900 million (previously expected to be EUR 10 billion). between EUR 1.5 billion and EUR 1.5 billion). The Group expects return on employed capital less weighted average cost of capital (ROCE over WACC) to be between 1 and 5 percentage points (previously expected to be between 5 and 9 percentage points). Covestro's greenhouse gas emissions are expected to rise to 5.5 to 6 million tonnes of CO2 equivalent (previously estimated at 5.6 to 6.1 million tonnes). The group also expects second-quarter EBITDA to be between 430 million and 530 million euros.

Dr. Thomas Toepfer, CFO of Covestro, said: "In the first quarter we benefited from continued high market demand. However, since the beginning of the war in Ukraine, we have seen significant risks to the energy supply and supply chain. Increase. Others include the weakening of the global economy, and the impact and restrictions related to the Covid-19 outbreak, especially in China, are still challenging. As a result, we have decided to adjust our full-year guidance. We are continuing to monitor further developments so that we can lead as much as possible Covestro gets through this period.”

Since last year Covestro restructured the group and reorganized the original three businesses into two segments, "Functional Materials" and "Solutions and Specialty Chemicals", the group will report in the new financial year for the first time since fiscal 2022. report under the control system. EBITDA has replaced core business volume growth as the company's new KPI since the beginning of the year. The company has also introduced a sustainability metric for the first time in its performance indicators, measured in direct and indirect GHG emissions (Scope 1 and 2).

Towards a circular economy and climate neutrality

Covestro announced its ambitious climate goals in March 2022: the group is committed to achieving climate neutrality and net-zero emissions by 2035[1]. To this end, the company plans to reduce GHG emissions from production directly (Scope 1) and purchased energy (Scope 2) by 60% to 2.2 million tonnes by 2030. In addition, the company will further reduce indirect greenhouse gas emissions (Scope 3) upstream and downstream of the value chain, and will set relevant emission reduction targets in 2023.

From a long-term perspective, Covestro is committed to offering zero carbon footprint specifications for all products and is continuously enriching its product portfolio. For example, the company has been supplying the world's first zero-carbon footprint[2] polycarbonate product to customers from 2021, and launched its first zero-carbon footprint MDI (diphenylmethane diisocyanate) in February 2022. With these products, Covestro is drastically reducing its cradle-to-gate carbon footprint, helping customers achieve their climate goals and driving the transition to a circular economy.

In the first quarter of 2022, Covestro made further progress on the road to achieving ambitious climate goals and a full cycle. For example, earlier this year, the group announced the signing of an agreement with Fortescue Future Industries (FFI), an Australia-based global green energy company, which will supply up to 100,000 tonnes of green hydrogen and its derivatives annually. Deliveries are expected to begin in 2024 for Covestro's production sites in Asia, North America and Europe, helping Covestro reduce CO2 emissions by up to 900,000 tons per year.

Sales growth in the two segments

In the first quarter of 2022, sales in the Functional Materials business segment increased by 37.2% to EUR 2.4 billion (previous year: EUR 1.7 billion). The biggest positive impact came from Covestro's still dominant competitive position, which maintained a high average selling price. EBITDA in the Performance Materials segment fell slightly by 1.6% to EUR 620 million, which was almost the same as the same period last year (previous year: EUR 630 million). This was largely driven by higher raw material and energy prices, which, although largely offset, still resulted in lower margins. Free operating cash flow in the segment decreased by 56.8% to EUR 112 million (previous year: EUR 259 million), mainly due to an increase in cash used for working capital.

Sales in the Solutions and Specialty Chemicals segment increased by 45.3% in the first three months of fiscal 2022 to EUR 2.2 billion (prior year: EUR 1.5 billion), mainly due to the benefits of the acquisition of RFM and a decrease in the selling price. rise. The segment's EBITDA increased to EUR 224 million, a year-on-year increase of 23.8% (prior year: EUR 181 million), mainly due to the acquisition of RFM. However, higher raw material and energy prices led to lower profit margins, which had an offsetting effect. Free operating cash flow in the Solutions and Specialty Chemicals segment fell to negative EUR 146 million (previous year: EUR 11 million), as cash used for working capital rose compared to the first quarter of last year.

[1] Achieving net zero greenhouse gas emissions refers to the balance between the greenhouse gas emissions generated by human activities (from own operations and energy procurement) and the reduction of greenhouse gases caused by humans.

[2] The "Zero Carbon Footprint" label is the result of an assessment of part of a product's entire life cycle. In this case, we analyze the stages from raw material extraction (cradle) to leaving the factory gate based on the ISO 14040 standard. TüV Rheinland AG subsequently rigorously evaluated the plausibility of this analysis. The analysis takes into account biocarbon sequestration based on preliminary data from the supply chain and renewable electricity used in the production process. Electricity has a traceability certificate. No carbon offsets are used.