Covestro swung to a net loss of €52.0 million ($60.3 million) in the second quarter from a net profit of €189 million in the corresponding period of last year on sales down 32.9% to about €2.2 billion.
The company confirms that EBITDA plunged 72.8% year on year (YOY) to €125 million, which it had communicated in preliminary results released earlier this month. The figures were “significantly impacted by the further spread” of the COVID-19 pandemic in Europe and North America, which caused core volumes to decrease 22.7% YOY on a “massive drop in demand in all key customer industries.”
The strongest impact from COVID-19 on volumes was in April and there has been sequential improvement since mid-May, the company says. Sales in EMEA and North America declined more sharply than in APAC, mainly due to the time lag in the impact of the pandemic, Covestro says.
Despite the slump, EBITDA was ahead of the company’s earlier expectations due to “an accelerated recovery in demand,” especially in the polycarbonates segment, in June, Covestro says. Free operating cash flow swung to a positive €24 million from a negative €55 million a year earlier as a result of strict liquidity management, the company says.
“As anticipated, the global coronavirus pandemic had a significant impact on our results in the second quarter,” says Markus Steilemann, CEO of Covestro. “We took the right measures in timely fashion to protect our employees, maintain production and supply chains, and ensure continuous supply to our customers. We have managed to accomplish that very successfully to date and will continue to steer Covestro resolutely through this crisis.”
The company has confirmed its full-year guidance, which it had revised in April. However, the uncertainties associated with the COVID-19 pandemic and its impact on economic development remain high, the company notes.
All Covestro’s businesses were hurt by COVID-19 in the second quarter. The polyurethanes segment saw core volumes drop 25.9% YOY and the trend affected all key customer industries, the company says. Sales were down 38.7% to €913 million, mainly due to the lower volumes sold and lower average selling prices. EBITDA for the business swung to a negative €24 million from a positive €172 million a year earlier as margins weakened, Covestro says.
Second-quarter core volumes in the polycarbonates segment fell 14.4% YOY. The decreased volumes, a result of significant drops in demand from the automotive and transport industries, were cushioned by less of a decline in volumes from the electrical, electronics, and household appliances industries and volume growth in the construction industry. Sales decreased 27.8% YOY to €648 million as selling prices declined and EBITDA plunged 37.7% to €96 million.
Core volumes in the coatings, adhesives, and specialties segment were down 25.3% YOY. The pandemic resulted in far weaker demand from key customer industries, a trend that was reflected in particular by a downturn in volumes in the automotive and transport industries. Sales of the business fell 28.7% to €443 million, mainly due to the decline in volumes and lower selling prices. EBITDA dropped 60.0% to €60 million as margins softened.
Covestro’s management and supervisory boards, as well as its workforce, are making a joint solidarity contribution to enhance the company’s resilience in the current environment. For Covestro’s German businesses, the management board and employee representatives have agreed on a model to reduce working hours and remuneration for all employees by the end of November 2020. All Covestro’s group companies outside Germany are implementing comparable country-specific, cost-saving measures.
By: Ian Young
Source: Chemical Week
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