Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Covestro AG (COVTY, Financial) achieved a positive free operating cash flow of EUR89 million, aligning with their guidance.
- The company's transformation program, STRONG, yielded savings of EUR119 million, contributing to operational efficiency.
- Covestro AG (COVTY) reduced its greenhouse gas emissions by 17% and increased its renewable electricity share from 16% to 22%.
- The company is investing in sustainable growth, including a significant expansion in Hebron, Ohio, to meet the demand for specialized polycarbonate materials.
- Covestro AG (COVTY) reported a 7.4% increase in global sales volume, driven by improved asset availability and demand in APAC.
Negative Points
- Sales for fiscal year 2024 slightly decreased by 1.4% to EUR14.2 billion due to lower prices and unfavorable FX effects.
- EBITDA was impacted by a negative pricing delta of EUR514 million, despite a volume rebound.
- The company reported a net income loss of EUR266 million, resulting in a negative earnings per share of EUR1.41.
- Covestro AG (COVTY) faced challenges in the automotive sector, with a decline in growth in the second half of 2024.
- The company anticipates restructuring costs of around EUR200 million in 2025, impacting reported EBITDA.
Q & A Highlights
Q: Could you provide insights into the order book development and how China has emerged post-New Year celebrations?
A: The end market growth for 2025 shows a positive trend compared to 2024, but this is expected more in the latter part of the year. Currently, there are some positive signs, but not in a structural manner. China returned reasonably well post-New Year, but the economic boost is still pending, awaiting governmental decisions.
Q: Have you modeled scenarios where local customer industries might be affected by potential tariffs, particularly in automotive and furniture?
A: Covestro produces significantly within regions, minimizing the impact of tariffs. For example, the US is a net import market for MDI, so higher tariffs could be beneficial for us as a local producer. We have a diversified global footprint, and any tariff scenarios should balance out without significantly affecting our sales.
Q: What is the guidance on gas and energy costs, and are there concerns about revising guidance due to potential production cuts?
A: Energy costs are forecasted at EUR1.1 billion for this year, with Q1 being particularly impacted. However, natural gas and electricity prices are expected to decrease, especially over the summer. The guidance accounts for these factors, and we do not anticipate a lasting negative effect.
Q: Is there any concern regarding the Chinese regulatory process for the XRG transaction?
A: The regulatory process in China is proceeding as expected, and we are confident in meeting all requirements. The collaboration with regulatory bodies is well-prepared, and we anticipate a successful outcome.
Q: Can you provide regional insights, particularly regarding the North American market?
A: The US market is balanced, with no significant concerns. It stands between China, which is stronger in demand, and Europe, which is weaker. There are no relevant signs of weakening domestic demand in North America.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
