Leverkhausen, Germany – Polyurethane prices have come off the boil and reduced earnings at Covestro in the third quarter of 2018. Sales across the business were up 4.8%.
Covestro sees flat earnings as sales rise almost 5% in Q3
Sales in polyurethanes were down 1.2% to EUR 1.8 bn. Business in the Americas was good but offset by declines in Europe and Asia. Volumes also fell by 2% as unplanned plant downtime hit production. Additionally, raw materials prices rose. These factors hit EBITDA which fell 21.5% compared with the third quarter 2017. In 2018 the PU business EBITDA was EUR 432m.
The smaller Coatings, Adhesives, Specialties segment sales were up 8.8% compared with the 2017 quarter. The division had sales of EUR 606 m and all regions contributed to this increase. EBITDA increased by just under 1% to EUR 126m. At the same time volumes increased in the third quarter of 2018 by 7.7% compared with the earlier year's number.
Looking across the company, which has a sizeable polycarbonates business, group sales were EUR 3.7 bn in the third quarter of 2018. This is a 4.8% rise on the same quarter in 2017.
The increase was due to higher selling prices and volumes. However, the company said that core volumes, its preferred metric, were up by 0.2%. Despite limited product availability, this was at last year’s level.
Covestro's EBITDA was EUR 859 m in the quarter, the same level as 2017. The company said in its discussion of the results that declining margins in polyurethanes were offset by higher margins in the polycarbonates.
Free operating cash flow was down 12.2% to EUR 578 million due to increased investments. The company most recently announced plans to spend EUR 1.5 bn on 500kT/year more MDI in the US.
Markus Steilemann, Covestro ceo said: 'The investments we have decided on point us in our future direction and lay the foundation for organic growth'. He added that the investments announced so far had focused on MDI because demand is growing at around 5%/year, or GDP plus 2%.
Looking to the remainder of the year, CFO, Klaus Toepfer said that the rest of the year is looking increasingly tough but that the firm should achieve the numbers which it set itself at the start of the year.