Covestro Shares

Performance of Covestro Shares in Weak Economic Environment

Similar to the global economy, stock exchanges in fiscal 2024 continued to be impacted by the global demand crisis in many industries, which had persisted since mid-2022. Alongside the war in Ukraine, markets were impacted in particular by the escalation of the conflict in the Middle East, as well as smoldering tensions between China and Taiwan and between China and the United States.

The German DAX benchmark, the index relevant for Covestro, trended continuously stronger in the course of 2024 and, driven by interest rate and inflation movements, reached a new all-time high of 20,426.27 points on December 12, 2024, even though economic and structural factors weighed on the economy. As a result, the DAX was detached from the actual economic performance, especially that of the energy-intensive manufacturing industries, rising 18.8% to 19,909.14 points since the beginning of the year. Despite intervening periods of weakness, the European benchmark index EURO STOXX 50* went up 7.7 % year-over-year to 4,869.28 points, driven by significant gains in the course of the first half of 2024.

The weaker trend, particularly of European chemical stocks, in the course of 2024 compared with the DAX and EURO STOXX 50 benchmark indices was attributable to lower demand from the processing industry. Weak demand, combined with higher supply and production volumes, had a disadvantageous effect on margins, as any benefit from lower raw material prices had to be passed on to customers. The result was another deterioration in earnings compared with the year 2023. By December 31, 2024, the STOXX Europe 600 Chemicals** index was down 6.6% from the beginning of the year.

At the start of the fiscal year, the Covestro share price moved around the €50 mark, dropping to a low of €46.98 on February 19, 2024. The share price movements were not influenced by business performance, but rather initially by speculation about progress in the open-ended discussions with the Abu Dhabi National Oil Company (ADNOC), Abu Dhabi (United Arab Emirates). Covestro announced on June 24, 2024 that it had entered into concrete negotiations about a possible transaction and the possible conclusion of an investment agreement. This pushed the share price to a level of €55, which it managed to hold onto, apart from a brief period of weakness in August.

As a result of an investment agreement being entered into between Covestro and XRG P.J.S.C (XRG), Abu Dhabi (United Arab Emirates), (formerly: ADNOC International Limited, Abu Dhabi (United Arab Emirates)), with a potential offer of €62 per share, the share price again rose significantly on October 1, 2024. The publication of a takeover offer on October 24, 2024 marked the start of the first offer period, which ended on November 27, 2024 with an acceptance ratio of 60.39%. During the second offer period from December 3, 2024 to December 16, 2024, the acceptance ratio increased to 81.77%. Together with the 9.81% of shares acquired by XRG directly and the shares tendered, this corresponds to a proportion of 91.58% of Covestro’s share capital as of 31 December, 2024. Covestro shares (1COV) traded at a stable level during the entire offer period. The share price receded slightly after the end of the extended offer period, ending the year at a closing price of €56.16.

Since October 30, 2024, the shares tendered to XRG have been listed and traded on the stock exchange under the 1CO ticker symbol. Apart from minor variances, the performance of the 1CO share price during the offer period corresponded to that of 1COV shares. The share price trended firm after the end of the offer period, closing the year 2024 at €57.50.

1COV shares reached a high of €58.48 on October 15, 2024, while the 1CO share price reached its high of €59.20 on November 5, 2024.

Compared with the closing price of €52.68 for the year 2023, this corresponds in fiscal 2024 to a share price performance for 1COV shares (without dividend reinvestment since no dividend was paid for fiscal 2023) of 6.6%.

Following the completion of the offer periods with an acceptance ratio of 81.77%, the shares tendered and the 9.81% of shares already held by XRG were removed from the calculation of the freefloat. Since the remaining freefloat was less than 10%, Covestro was excluded from the DAX on December 27, 2024.

As of the end of the reporting year, Covestro’s market capitalization stood at €10.8 billion, broken down into €1.9 billion in the stock line of shares not tendered (1COV) and €8.9 billion in the stock line of tendered shares (1CO), based on 188,740,330 shares outstanding. Covestro holds 259,670 treasury shares. The average daily Xetra trading volume was 673,034 shares for 1COV shares. As expected, the trading volume of 1CO was substantially lower.

Xetra closing prices on Xetra for Covestro; source: Deutsche Börse AG

Dividend Policy

Since the 2020 Financial Statements, Covestro AG’s dividend policy has been more closely linked to the Group’s overall business situation. The policy specifies that Covestro AG should distribute between 35% and 55% of the Group’s net incomeKonzernergebnisses to shareholders of Covestro AG. Since the Group again generated negative net income, no dividend will be paid to Covestro AG shareholders for fiscal 2024, as for fiscal 2023, in accordance with the current dividend policy. Due to the negative net income, in the year 2024, no dividend per share carrying dividend rights was paid for fiscal 2023.

Virtual Annual General Meeting Held on April 17, 2024

Covestro AG’s Annual General Meeting (AGM) was held on April 17, 2024. Taking account, in particular, of legislation, the authorization to hold a virtual AGM, the ownership structure, and the expected costs, Covestro had resolved at the end of the year 2023 to hold a virtual AGM, as in the previous year.

The AGM ratified the actions of the Board of Management and Supervisory Board for the past fiscal year 2023 with a large majority. The Group’s net income was negative in fiscal 2023, showing a net loss of €198 million. Under the current dividend policy, this means that no dividend was distributed to shareholders of Covestro AG. Similar to the resolution proposals on ratification of the actions of the Board of Management and Supervisory Board, all other proposed resolutions were passed with large majorities.

Share Buyback Program

On April 17, 2024, the Board of Management of Covestro AG submitted to the AGM a renewed authorization to buy back treasury shares of up to 10% of the existing share capital. The AGM granted this authorization with a majority of 93.48%.

ADR Program

The American Depositary Receipt (ADR) program grants global investors simplified access to Covestro shares. Covestro ADRs are traded over the counter in the United States under the COVTY ticker symbol. At the end of fiscal 2024, the total number of outstanding ADRs reached 3.3 million (previous year: 7.4 million).

Moody’s Confirms Covestro Rating and Outlook

On May 3, 2024, Moody’s Investors Service, London (United Kingdom), confirmed Covestro’s Baa2 investment-grade rating with a stable outlook. Covestro intends to continue to maintain financing structures and financial ratios that support a solid investment-grade rating in the future.

Majority of Analysts Neutral on Covestro Shares

At the end of the year 2024, Covestro was covered by ten securities brokers. Of these, one analyst issued a buy recommendation and nine were neutral. The average share price target was approximately €61 at the reporting date.