- Core volumes down by 5.6%
- Group sales approximately EUR 10.7 billion (–13.7%)
- Free operating cash flow increased to EUR 530 million (+12.1%)
- Realignment of strategy towards becoming fully circular
Covestro saw a strong end to an exceptional year in 2020 and benefited, especially in the second half, from its consistent crisis prevention measures and a recovery in demand. Core volumes sold in the fourth quarter of 2020 rose by 1.7% globally over the prior-year period. Global group sales therefore increased by 5.0% to EUR 3.0 billion as a result of higher selling prices. Net income climbed sharply from EUR 37 million in the prior-year quarter to EUR 312 million. FOCF also increased in the fourth quarter, by 19.4% to EUR 394 million.
Despite the very successful fourth quarter, the Group could not fully compensate the massive, pandemic-related cut-backs that arose in the first six months. In 2020, the Group's core volumes sold were down by 5.6% over the prior-year period. Group sales also declined, falling 13.7% year over year to approximately EUR 10.7 billion. By implementing extensive cost-saving measures, Covestro could be able to finish fiscal 2020 as forecast at approximately EUR 1.5 billion (previous year: approx. EUR 1.6 billion). Net income reached EUR 459 million (–16.8%), while free operating cash flow (FOCF) increased to EUR 530 million (+12.1%).
“We were able to successfully navigate through this highly exceptional year and maintained our ability to act at all times. We took a broad range of measures to protect our employees, keep supply chains running, and expand our strong liquidity position,” said CEO Dr. Markus Steilemann. “In fiscal 2020, we therefore were able to actively pursue our strategic goals. We defined our vision to become fully circular and took a major step in this direction with the announced acquisition of the Resins & Functional Materials business from DSM.”
For fiscal 2021, Covestro expects core volume growth of between 10% and 15%. Around 6 percentage points of this figure are attributable to the planned acquisition of the Resins & Functional Materials (RFM) business from DSM, that the Group announced.
Realignment of the strategy: Vision as guiding principle
Earlier in 2020, Covestro announced to become fully circular. To fulfill this long-term vision and embed circularity into all areas of its business activities, the Group decided to focus on four topics: alternative raw materials, innovative recycling, joint solutions, and renewable energies. With the clear goal of becoming fully circular and as an answer to changing market expectations, Covestro has consequently aligned its Group strategy.
This effort is centered on increased customer orientation and sustainable growth. Starting on July 1, 2021, Covestro will manage its business in a new, tailored structure around seven business entities aligned to customer needs and the competitive landscape. Going forward, the Group will distinguish between two business areas, Performance Materials as well as Solutions and Specialties.
- Performance Materials: This area will form a separate business entity and will comprise Standard Polycarbonates, Standard Urethane Components, and Basic Chemicals.
- Solutions and Specialties: This area will consist of the six new business entities Tailored Urethanes, Coatings and Adhesives, Engineering Plastics, Specialty Films, Elastomers, and Thermoplastic Polyurethanes.
Covestro is combining the consistent alignment of products and processes with its customers’ needs with an even sharper focus on addressing sustainability in a profitable way. In the future, the Group will apply sustainability criteria even more stringently when undertaking investments, acquisitions, and R&D activities. As part of its transition towards a circular economy, Covestro is also expanding its portfolio of circular products.
“Our vision to become fully circular is charting the direction of our new Group strategy. The new structure is creating an optimal starting point for the future and will position us to become significantly more competitive,” according to Steilemann. “This will enable us to better meet our customers’ needs, make our company more efficient and effective, and generate sustainable growth. We are truly driving forward the transformation towards a circular economy."