Covestro Germany — Earnings in Covestro's polyurethanes business fell 63% in 2019 because of lower prices and intensified competition.
Overall, the company generated total sales of EUR 12.4bn in 2019 down 12.4% on the previous financial year. EBITDA across the business fell by 49.9% and reached EUR 16 bn in 2019.
Toepfer 2020 could be tough. Credit: Covestro
'The operating result for fiscal 2019 was, as expected, below the record levels of previous years due to continuing pressure on prices,' said CFO Thomas Toepfer.
The company's Polyurethanes business sales which fell 21.5% between 2018 and 2019. They reached EUR 5.8m in 2019. This compares with EUR 7.4 bn in the previous year.
EBITDA across in the division fell 63.2% and reached EUR 648m in 2019 . Covestro blamed this on 'the negative trend in average selling prices. This was due to intensified competition. Lower selling prices cut into margins although, this was offset to some extent by lower input prices for raw materials. EBITDA was EUR 648 m in 2019.
Although the headline numbers are down, and demand from key markets such as automotive for polyurethane was down, core volumes were up 2.3%. This was because demand from business sectors including: construction, furniture, and appliances was up in 2019.
The company's Coatings Adhesives Specialties business sales fell 22.8% between 2018 and 2019. They reached EUR 3.5bn in 2019. This compares with EUR 4.5bn in 2018.
EBITDA across in the division fell 45.7% and reached EUR 563m in 2019. Core volumes fell 1% because there was less demand for coating pre-cursors from the car industry than 2018. The company managed to increase earnings in the division because of currency effects. Earnings from DIC Coatings from Japan, which it bought, in the financial year helped.
Turning to capacity increases, Covestro said that its expansion at Brunsbuttel, Germany is on stream. Capacity there is 400 kT/year.
Despite pausing construction of its 500 kT/year MDI plant in Baytown, Texas for 18-24 months, Covestro is upbeat about the material. The company said: 'the long-term growth prospects for MDI are highly promising.'
Covestro said 2019 ended with 'fierce competition' and there was 'fierce' competitive pressure in all business segments. This has set the tone for the start of 2020.
At the same time, the outbreak of coronavirus in China will have an impact on the business in 2020, but it is not clear how large this will be.
Overall, Covestro predicts volumes will grow by a 'low single-digit percentage' in 2020. EBITDA for 2020 will be between EUR 1bn and EUR 1.5bn, the company said.
