EBITDA down at Covestro in 2018, despite sales growth

Dusseldorf, Germany — Covestro reported lower earnings in 2018, despite a 3.5% rise in sales and volumes across the board.

Although group sales reached  EUR 14.6bn for the year, EBITDA was 6.8% below its 2017 level. It reached EUR 3.2bn in 2018.

'Demand for our high-tech materials remains intact. That is a strong foundation for our profitable growth in the long-term,' said CEO Markus Steilemann.  Although selling prices and volumes were higher, the effect of this was more or less wiped out by higher raw material prices. Q4 had a very strong negative impact, he added.

Lower water levels in the Rhine meant Covestro had to spend more than expected on logistics in 2018. Expenses related to an efficiency programme also affected the results.

Margins are ‘normalising faster than expected’ and are expected to continue this downward trajectory. This change in direction follows several years of very high MDI and TDI prices.

In 2018, margins in the polyurethanes business fell from 29.5% to 23.6% as the availability of MDI and TDI increased worldwide. Covestro's sales in the division were flat at EUR 7.4bn but, at the EBITDA level, there was a 19% drop between 2017 and 2018. In 2017, the division's EBITDA was EUR 2.2bn; it fell to EUR 1.8bn in 2018.

The much smaller coatings, adhesives and sealants business managed to increase sales 1.5%. Turnover grew to EUR 2.4bn in 2018 from EUR 2.3bn in 2017. Once again, margins came under pressure in the year, and there was a EUR 22m reduction in EBITDA to EUR 464m in 2018. This is a 4.5% drop on the 2017 level.