Covestro increases investment in sustainable growth

• Sustainability trends drive demand for Covestro products

• New world-class MDI plant: investment plans to restart

• Invest 1 billion euros in circular economy projects over the next ten years

• Average mid-cycle EBITDA to increase to EUR 2.
8 billion in 2024

• Expanded sustainable product portfolio: 45 products based on alternative raw materials commercialized

Covestro is building the foundations for future sustainable growth
.
As part of its new "Sustainable Future" strategy, the Group will continue to focus on the circular economy and the structurally growing demand for sustainable solutions
.
From China and Europe to the United States, initiatives to reduce greenhouse gas emissions are driving demand, especially in energy-efficient buildings and electric mobility
.

Against this backdrop, Covestro expects global demand for rigid foam precursor MDI and flexible foam precursor TDI to grow by 6% annually by 2025
.
For MDI in particular, demand is approaching the already high capacity utilization across the industry
.
Covestro announced at this year's investor conference that it will restart its investment in the construction of a world-class MDI factory that was suspended in early 2020
.
Covestro plans to use the energy-efficient AdiP technology in the new project, which is already in use at the Blomsbitt plant in Germany
.
This technology can reduce steam consumption by up to 40% and electricity consumption by 25% per ton of MDI product produced, thereby reducing carbon dioxide emissions by up to 35%
.
The company is looking into building the world-class MDI plant in the US or China, with a final decision expected after the current project phase
.
The new plant is scheduled to start production in 2026
.

“The growing global demand for sustainable solutions presents us with huge additional potential market opportunities
.
Our high-tech plastics are already enabling sustainable innovation in many industries
.
” Covestro CEO Dr.
Xerox .
Markus Steilemann) said, "On the road to full circle, we are increasing capital expenditures in a targeted manner to make our customers more sustainable through customized solutions
.
"

Expand production capacity

Covestro aims to achieve sustainable growth and continuously adapt its plans for future investments and acquisitions in line with profitability and sustainability requirements
.

Dr.
Thomas Toepfer, Chief Financial Officer of Covestro, said, "Our current economic situation is very good, but we must not be satisfied with it
.
In order to achieve our ambitious goals and vision of a full cycle, we plan A capital expenditure of around EUR 1 billion for circular economy projects
.
”

In addition, organic growth will continue to play a central role
.
Covestro will invest around 800 million euros in 2021, but capital expenditures will increase significantly in the following years
.
Therefore, the average growth rate of capital expenditure will be equal to or slightly higher than the level of depreciation and amortization
.
In the Performance Materials division, the construction plan for a new world-class MDI plant will significantly increase capital expenditures, especially between 2024 and 2026
.
At the same time, in order to meet the growing demand for TDI, Covestro will expand the TDI production capacity at the Dormagen site in Germany as early as 2023 through de-bottlenecking projects
.

In addition, the Group is also investing in the Solutions and Specialty Chemicals sectors
.
By 2025, the Coatings & Adhesives division will invest around 300 million euros to increase production capacity and achieve further growth
.
Covestro is also focusing on expanding its global blending capacity for differentiated polycarbonate products and will fully focus on this growth market in the polycarbonate sector in the future
.
At the same time, the market demand for Covestro's special film products is growing, especially for the medical industry and holographic film products.
To this end, Covestro will invest around 200 million euros to increase production capacity by 2025
.

Mid-cycle average EBITDA to grow substantially through 2024

Under the new strategy, Covestro re-divided its business into two segments "Solutions and Specialty Chemicals" and "Functional Materials" in July 2021
.

Through the reorganization, the Group has given more corporate responsibility to the various divisions, while all operational activities that are critical to success throughout the value chain are directly integrated into these new divisions
.
As a result, companies can better meet the requirements of specific markets as well as the individual needs of customers
.
The Group expects that the core business sales of both segments will grow by 2025
.
Earnings are also expected to suffer: Functional materials margins are primarily driven by supply and demand, while solutions and specialty chemicals margins are expected to rise to 17% by 2024
.

Based on this restructuring, the successful integration of the resins and functional materials businesses (acquired from DSM in April 2021) and demand growth driven by sustainability, Covestro expects mid-cycle average EBITDA to increase from the current 2.
2 billion EUR grows to EUR 2.
8 billion in 2024
.

At the same time, the new group structure will provide Covestro with significant potential for efficiency gains until 2023
.
The purpose of the reorganization is to lay a solid foundation for the long-term development of the enterprise
.
As previously announced, Covestro is reviewing all activities and processes worldwide to determine whether they are in line with the company's vision and strategy
.
Overall, fixed costs in 2023 will be at the same level as in 2020
.

Expand sustainable product portfolio

On the way to full circle, Covestro will continue to maintain its strong commitment to future technologies and continuously expand its sustainable product portfolio
.
For example, the company has successfully commercialized approximately 45 products based on alternative raw materials and is advancing research on nearly 90 related products
.

In 2021, Covestro has reached an important milestone on the road to transformation
.
Currently, the company has three production sites (Antwerp, Belgium, Shanghai, China, Krefeld-Jurdingen, Germany) that offer sustainable products certified by ISCC Plus mass balance
.
Obtaining this "International Sustainability and Carbon Certification" means that Covestro has the ability to supply customers with high-performance polycarbonate plastics made from alternative raw materials, as well as rigid foam precursor MDI, which are of the same quality as the corresponding products.
Fossil-based products are no different
.
In this way, Covestro helps customers reduce their carbon footprint
.