Covestro AG, based in Leverkusen, Germany, and currently in the acquisition process by Abu Dhabi National Oil Co. (Adnoc), has revised its full-year 2024 earnings guidance, tightening the range due to anticipated softer operating profits across its core business segments. This comes despite a return to profitability in the third quarter, following four consecutive quarters of net losses.
Covestro now projects its annual EBITDA to fall between €1.0 billion and €1.25 billion, lowering the upper limit from its previous July forecast of up to €1.4 billion. In 2023, the company’s full-year EBITDA was €1.08 billion, with initial 2024 projections extending to as high as €1.6 billion in the 2023 annual report.
For the performance materials segment, Covestro adjusted its EBITDA expectation to between €400 million and €600 million, reducing the upper range by €100 million from its July forecast. In the solutions and specialties segment, Covestro now anticipates EBITDA to be “slightly down” from 2023, revising earlier guidance that indicated earnings on par with last year.
Explaining these adjustments, Covestro noted that “challenging economic conditions” persist, necessitating a tightened EBITDA forecast.
CEO Markus Steilemann highlighted that Covestro’s third-quarter results saw increased sales volumes and improved earnings, despite ongoing market challenges. He emphasized the company’s commitment to its "Sustainable Future" strategy and its focus on factors within Covestro’s control.
Regarding Adnoc's acquisition process, Covestro noted that an offer document was published on Oct. 25, detailing Adnoc’s intent to purchase all outstanding Covestro equity at €62 per share. The boards will “carefully review” the offer document and, subject to this review, expect to recommend acceptance of the offer.
Q3 Performance Overview
Covestro reported €33 million in net income for the third quarter, reversing a €31 million net loss from the same period last year, with sales increasing 1% to €3.6 billion. This result outperformed analysts’ forecasts of a €15.4 million net loss. EBITDA also rose 3.6% to €287 million, boosted mainly by higher sales volumes across Europe, the Middle East, Latin America, and the Asia-Pacific regions. Despite stable revenue, raw material price reductions kept selling prices lower.
Christian Baier, CFO of Covestro, noted that although global demand remains low, efficiency measures have led to a slight EBITDA increase. The performance materials segment reported a 4.1% sales rise year-over-year to €1.78 billion, with a 47.1% increase in EBITDA to €125 million, despite pricing pressures from market oversupply.
In the solutions and specialties segment, sales dipped 2.0% to €1.77 billion, largely due to a 4.9% drop in average prices that higher volumes couldn’t fully offset, with EBITDA declining 15.4% to €208 million.
Covestro adjusted its 2024 outlook for main customer industries, forecasting a 0.5% decline in global automotive demand, a shift from previous expectations of slight growth, due to weakened electric vehicle demand and high inventory levels. Construction sector growth remains forecast at -2.5%, while projections for the electrical, electronics, and household appliances industries have been upgraded to 4.2% growth.
Source: Covestro
