Results of Operations and Financial Position of the Covestro Group
Results of Operations
Group sales rose by 1.0% to €3,603 million in the third quarter of 2024 (previous year: €3,568 million), driven by the increase in sales volumes in the EMLA and APAC regions. In total, volumes sold had a sales-boosting effect of 6.1%. This was set against a lower selling price level in all regions, which coincided with lower raw material prices being passed on to customers and had a negative effect of 4.2% on sales. In addition, exchange rate movements had a negative effect of 0.9% on sales.
In the third quarter of 2024, sales were up 4.1% to €1,777 million (previous year: €1,707 million) in the Performance Materials segment, while they decreased by 2.0% to €1,773 million (previous year: €1,809 million) in the Solutions & Specialties segment. Sales were 5.3% higher, at €1,460 million (previous year: €1,387 million), in the EMLA region and rose by 0.3% to €1,249 million (previous year: €1,245 million) in the APAC region in the third quarter of 2024. In the NA region, sales declined by 4.5% to €894 million (previous year: €936 million).
1 EMLA: Europe, Middle East, Latin America (excluding Mexico), Africa region.
2 NA: North America region (Canada, Mexico, United States).
3 APAC: Asia and Pacific region.
The Group’s EBITDA was up 3.6% to €287 million in the third quarter of 2024 (previous year: €277 million), largely because of higher volumes sold. Moreover, lower provisions for variable compensation of €46 million as well as additional government subsidies to compensate for electricity prices in Germany had a positive effect on earnings. By contrast, the decline in the selling price level, which was only partially offset by lower raw material prices, had an adverse impact on earnings. Furthermore, a smaller amount of business development subsidies received in China than in the previous year had a negative effect on EBITDA. Exchange rate movements did not have any notable effect on earnings.
The Performance Materials segment’s EBITDA increased by 47.1% to €125 million (previous year: €85 million). In the Solutions & Specialties segment, by contrast, EBITDA went down 15.4% to €208 million (previous year: €246 million).
The Covestro Group’s EBIT improved by 7.0% to €76 million in the third quarter of 2024 (previous year: €71 million).
Financial Position
In the third quarter of 2024, cash inflows from operating activities amounted to €262 million (previous year: €490 million). This decline was driven primarily by lower funds freed up from working capital compared with the prior-year quarter and was partially offset by lower income tax payments and a rise in EBITDA.
Free operating cash flow was down, amounting to €112 million in the third quarter of 2024 (previous year: €308 million), largely due to lower cash flows from operating activities.
| Net financial debt | ||
|---|---|---|
| Dec. 31, 2023 | Sep. 30, 2024 | |
| € million | € million | |
| Bonds | 1,990 | 1,492 |
| Liabilities to banks | 657 | 1,191 |
| Lease liabilities | 743 | 734 |
| Liabilities from derivatives | 15 | 3 |
| Other financial liabilities | 2 | 151 |
| Receivables from derivatives | (19) | (29) |
| Gross financial debt | 3,388 | 3,542 |
| Cash and cash equivalents | (625) | (539) |
| Current financial assets | (276) | (215) |
| Net financial debt | 2,487 | 2,788 |
In comparison with December 31, 2023, the Covestro Group’s gross financial debt rose by €154 million to €3,542 million as of September 30, 2024. This was mainly attributable to an increase of €534 million in liabilities to banks, resulting primarily from new borrowings in an amount of €343 million in China and €200 million in Germany. At the same time, there was an increase in other financial liabilities, mainly because of the issuance of commercial paper under the European Commercial Paper Program (ECPP) in an amount of €149 million. The repayment of a €500 million bond that was placed in March 2016 from the Debt Issuance Program had an offsetting effect.
Cash and cash equivalents were down €86 million in comparison with the figure on December 31, 2023, to €539 million. This was mainly due to cash outflows for additions to property, plant and equipment and intangible assets of €422 million and negative cash flows from financing activities of €23 million. Conversely, cash inflows from operating activities of €258 million and net inflows from short-term bank deposits of €61 million pushed up cash and cash equivalents.
The net inflows from short-term bank deposits mentioned earlier led to a decrease in current financial assets by €61 million to €215 million.
As a result, net financial debt grew by €301 million compared with the figure on December 31, 2023, to €2,788 million as of September 30, 2024.