Covestro has strong second quarter with strong earnings momentum

●Core business sales increased by 35.
0%

● Group sales of over 3.
9 billion euros (+83.
5%)

● EBITDA increased to EUR 817 million (>500%)

● Net profit totaled 449 million euros

● Free operating cash flow rose strongly to 374 million euros

● Confirmed the increase in 2021 earnings forecast announced on July 12

● Laying the foundation for sustainable growth: The new group structure will be launched on July 1

In the second quarter of 2021, Covestro benefited from a continued strong recovery in global demand, which was weak in the same period last year due to the impact of the COVID-19 pandemic
.
On April 1, 2021, the company completed the acquisition of DSM's resins and functional materials (RFM) business, and this performance report is the first consolidated statement
.
To sum up, the Group's core business sales achieved a substantial year-on-year growth of 35% in the second quarter, of which about 10% was contributed by RFM
.

At the same time, production disruptions in North America due to unexpected weather conditions, as well as ongoing raw material supply bottlenecks, had a negative impact on product supply in the second quarter and also restricted the growth potential of each business segment
.
In addition to higher volumes in the core business, sales prices also rose sharply.
As a result, group sales in the second quarter exceeded 3.
9 billion euros, an increase of 83.
5% year-on-year
.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to EUR 817 million (prior year: EUR 125 million), including a one-time negative impact of EUR 35 million from the consolidation of RFM, due to higher volumes and overall profit margins
.
Net profit for the second quarter of 2021 was EUR 449 million (prior year: EUR –52 million), while free operating cash flow (FOCF) increased significantly to EUR 374 million (prior year: EUR 24 million)
.

"We achieved a seamless transition to the positive business performance of the first quarter in the second quarter
.
With the business restructuring taking effect on July 1, we were also able to get closer to our customers and better respond to specific market needs
.
" Coase Dr.
Markus Steilemann, CEO of Genesis, said, "We are starting the second half of the year on a strong note and will continue to move forward at full speed to advance our vision of a full cycle
.
"

Confirmation of upward revision of 2021 profit forecast

In view of the stellar business performance, Covestro has raised its 2021 earnings forecast on July 12, 2021
.
The company confirmed the earnings forecast today
.
Covestro expects EBITDA to be between 2.
7 billion and 3.
1 billion euros due to an improved earnings outlook in the second half
.
Free operating cash flow is expected to be between EUR 1.
6 billion and EUR 2 billion, while return on capital employed (ROCE) is expected to be between 16% and 20%
.
Core business volume growth forecasts remain unchanged at between 10% and 15%, of which about 6 percentage points are contributed by RFM
.

Dr.
Thomas Toepfer, Chief Financial Officer of Covestro, said: "In the second quarter, we continued to benefit from strong demand and continued positive price movements, while maintaining cost control
.
In addition, we also achieved our first-ever compliance with RFM.
The full consolidation
of the businesses.
Our strong operating results further demonstrate the strategic rationale behind this acquisition
.
We will now carry this positive earnings momentum into the third quarter
.
"

Laying the groundwork for sustainable growth: new Group organisational structure launched on 1 July

Covestro has successfully achieved the first milestone of its "sustainable future" strategy presented in February 2021 by restructuring its group organization
.
The company has reorganized its three previous business segments - polyurethane, polycarbonate, coatings, adhesives and specialty chemicals - into seven tailor-made business units, and the new structure will come into effect on July 1, 2021
.
These divisions are divided according to their respective success factors to meet specific needs from customers and markets
.
The company is thus able to systematically align processes and products with customer needs, while focusing more on profitability and sustainability
.
In the future, Covestro will report based on the two segments "Functional Materials" and "Solutions and Specialty Chemicals"
.
Covestro's third-quarter 2021 financial report, scheduled for release on November 8, will be reported for the first time based on the new organizational structure
.

Strong performance in all business segments: double volume and sales growth

In the second quarter of 2021, the sales volume of the polyurethane business segment's core business increased by 27.
8% year-on-year, with growth in all major customer industries in all major regions
.
Sales in this segment were around 1.
8 billion euros, more than double the year-ago period (913 million euros)
.
This was mainly attributable to the increase in average selling price and total sales volume
.
EBITDA also rose significantly to EUR 452 million (prior year: EUR –24 million) due to improved margins
.

The polycarbonate business segment saw a 15.
4% year-on-year increase in core business sales in the second quarter of 2021, mainly due to increased sales in the automotive and transportation industries across all regions
.
Sales in this segment rose by 56.
6% to around EUR 1.
0 billion (prior year: EUR 648 million) due to higher total volumes and selling prices
.
EBITDA rose to EUR 260 million (prior year: EUR 96 million) due to a significant improvement in profit margins and higher total volumes
.

The core business sales volume of the coatings, adhesives and specialty chemicals business segment increased by 133.
5% year-on-year
.
About 100 percent of that increase was attributable to the initial consolidation of RFM
.
The segment's sales rose to EUR 926 million (prior year: EUR 443 million) thanks to a change in the product mix and an increase in volumes and selling prices
.
As a result, EBITDA also more than doubled year-on-year to EUR 134 million (prior year: EUR 60 million)
.

First half of 2021: Demand rebounds sharply

In the first half of 2021, the Group's core business sales volume increased by 18.
9% year-on-year, due to a significant recovery in demand from all major customer industries
.
In the first half of the year, sales rose by 47.
1 percent to approximately EUR 7.
3 billion, thanks to higher selling prices and total volumes and changes in the product mix
.
In particular, significantly higher selling prices not only offset higher raw material prices, but also increased Group EBITDA to approximately EUR 1.
6 billion (previous year: EUR 379 million)
.
In the first half of 2021, group net profit rose to EUR 842 million (prior year: EUR –32 million), while free operating cash flow increased to EUR 692 million (prior year: EUR –225 million)
.