Company News
September 29, 2021
Covestro Update
Covestro raises investment in sustainable growth
Investor Conference 2021: transformation toward a successful future
- Sustainability trends boost demand at Covestro
- New world-scale MDI plant: investment resumed
- EUR 1 billion for circular economy projects over ten years
- Mid-cycle EBITDA to rise to EUR 2.8 billion in 2024
- Expansion of sustainable portfolio: 45 products based on alternative raw materials already commercialized
Covestro is laying the groundwork for sustainable growth in the future. As part of its new “Sustainable Future” strategy, the Group is continuing to focus on the circular economy and the structurally increasing demand for sustainable solutions. Political initiatives to reduce greenhouse gases, such as in China, Europe and the United States, are driving demand, especially in the fields of energy-efficient construction and electromobility.
In this context, Covestro expects global demand growth for the rigid foam precursor MDI and the flexible foam precursor TDI to increase to 6 percent per year until 2025. For MDI in particular, demand is meeting an already high utilization of industry-wide capacities. At its Investor Conference this year, the Group announced that it would resume the investment project for the construction of a world-scale MDI plant, which was temporarily suspended at the beginning of 2020. Covestro plans to deploy the energy efficient AdiP technology, which is already used at its Brunsbuettel site in Germany. The technology can reduce steam by up to 40 percent and electricity by 25 percent per ton of product in an MDI plant, cutting CO2 emissions by up to 35 percent. The company is exploring building the new world-scale MDI plant in either the United States or China. A final decision is expected to be taken after the current project stage. Commissioning of the plant is planned for 2026.
“There is growing demand for sustainable solutions worldwide and that offers us significant additional market potential. Our high-tech plastics already enable sustainable innovations in many industries,” stated Dr. Markus Steilemann, CEO of Covestro. “On our path to becoming fully circular, we are increasing our capital spending selectively and are enabling our customers to become more sustainable with tailored solutions.”
Expansion of production capacities
Covestro aims to generate sustainable growth and in the future will align investments and acquisitions even more consistently to the aspects of profitability and sustainability.
“We’re now in very good economic shape. But we must not be content,” said Dr. Thomas Toepfer, CFO of Covestro. “In order to achieve our ambitious objectives and become fully circular, we are planning targeted capex spending of around EUR 1 billion on circular economy projects over the next ten years.”
In addition, organic growth will continue to play a central role. Covestro will invest around EUR 800 million in 2021 but capital expenditure is to raise substantial in subsequent years. Capital expenditure thus grows on average at or slightly above the level of depreciation and amortization. In the “Performance Materials” segment, the planned construction of the new world-scale MDI plant will significantly increase capital expenditures, particularly in the years 2024 to 2026. To meet the growth in demand for TDI as well, Covestro will expand its production capacities for TDI at the German site in Dormagen as early as 2023 through debottlenecking.
The Group is also investing in the “Solutions and Specialties” segment. Around EUR 300 million will be invested in additional capacities in the Coatings & Adhesives entity by 2025 to enable further growth. Covestro is expanding its compounding capacities for the global production of its highly differentiated polycarbonate. Future plans will focus entirely on this growth market in the area of polycarbonates. The company also sees growing demand for its Specialty Films products, particularly in the medical sector and for holographic films. To meet this demand, Covestro is investing around EUR 200 million in additional capacities by 2025.
Substantial increase in mid-cycle EBITDA up to 2024
Under its new strategy, Covestro reorganized its business into the two segments “Solutions and Specialties” and “Performance Materials” in July 2021. As part of that, the Group gave more entrepreneurial responsibility to the business entities and integrated all operational activities throughout the value chain that are critical to success directly into these new entities. As a result, it can better address the requirements of the specific markets and customers’ individual needs. In both segments, the Group expects an increase in core volumes sold by 2025. This is also expected to impact earnings: Whereas margins in the Performance Materials segment are highly supply-and-demand-driven, margins in the Solutions and Specialties segment are to be raised to 17 percent by 2024.
On the basis of the organizational realignment, the successful integration of the “Resins & Functional Materials” business acquired from DSM in April 2021, and sustainability-driven growth in demand, Covestro expects mid-cycle EBITDA to rise from its current level of EUR 2.2 billion to EUR 2.8 billion in 2024.
At the same time, the new Group structure offers significant efficiency potential that Covestro will leverage by 2023. The goal is to create the right basis for the long-term corporate development. As already announced, the company is currently reviewing all activities and processes worldwide to ascertain whether they fit with its vision and strategy. Overall, fixed costs in 2023 are to remain at the 2020 level.
Expansion of the sustainable product portfolio
On its path to becoming fully circular, Covestro is continuing its unwavering commitment to future technologies and constantly increasing its sustainable product portfolio. For example, the company has already successfully commercialized around 45 products based on alternative raw materials and is pressing ahead with almost 90 associated research products.
Key milestones on this path were achieved in 2021. The company now offers mass-balanced sustainable products from three sites (Antwerp in Belgium, Shanghai in China, and Krefeld-Uerdingen in Germany) that have been awarded ISCC Plus certification. This “International Sustainability and Carbon Certification” means Covestro can offer its customers high-performance plastic polycarbonate and the rigid foam precursor MDI both made from alternative raw materials in the same good quality as fossil-based counterparts. Covestro is thereby helping its customers reduce their carbon footprint.
https://www.covestro.com/investors/news/covestro-raises-investment-in-sustainable-growth/
September 29, 2021
Covestro Update
Covestro raises investment in sustainable growth
Investor Conference 2021: transformation toward a successful future
- Sustainability trends boost demand at Covestro
- New world-scale MDI plant: investment resumed
- EUR 1 billion for circular economy projects over ten years
- Mid-cycle EBITDA to rise to EUR 2.8 billion in 2024
- Expansion of sustainable portfolio: 45 products based on alternative raw materials already commercialized
Covestro is laying the groundwork for sustainable growth in the future. As part of its new “Sustainable Future” strategy, the Group is continuing to focus on the circular economy and the structurally increasing demand for sustainable solutions. Political initiatives to reduce greenhouse gases, such as in China, Europe and the United States, are driving demand, especially in the fields of energy-efficient construction and electromobility.
In this context, Covestro expects global demand growth for the rigid foam precursor MDI and the flexible foam precursor TDI to increase to 6 percent per year until 2025. For MDI in particular, demand is meeting an already high utilization of industry-wide capacities. At its Investor Conference this year, the Group announced that it would resume the investment project for the construction of a world-scale MDI plant, which was temporarily suspended at the beginning of 2020. Covestro plans to deploy the energy efficient AdiP technology, which is already used at its Brunsbuettel site in Germany. The technology can reduce steam by up to 40 percent and electricity by 25 percent per ton of product in an MDI plant, cutting CO2 emissions by up to 35 percent. The company is exploring building the new world-scale MDI plant in either the United States or China. A final decision is expected to be taken after the current project stage. Commissioning of the plant is planned for 2026.
“There is growing demand for sustainable solutions worldwide and that offers us significant additional market potential. Our high-tech plastics already enable sustainable innovations in many industries,” stated Dr. Markus Steilemann, CEO of Covestro. “On our path to becoming fully circular, we are increasing our capital spending selectively and are enabling our customers to become more sustainable with tailored solutions.”
Expansion of production capacities
Covestro aims to generate sustainable growth and in the future will align investments and acquisitions even more consistently to the aspects of profitability and sustainability.
“We’re now in very good economic shape. But we must not be content,” said Dr. Thomas Toepfer, CFO of Covestro. “In order to achieve our ambitious objectives and become fully circular, we are planning targeted capex spending of around EUR 1 billion on circular economy projects over the next ten years.”
In addition, organic growth will continue to play a central role. Covestro will invest around EUR 800 million in 2021 but capital expenditure is to raise substantial in subsequent years. Capital expenditure thus grows on average at or slightly above the level of depreciation and amortization. In the “Performance Materials” segment, the planned construction of the new world-scale MDI plant will significantly increase capital expenditures, particularly in the years 2024 to 2026. To meet the growth in demand for TDI as well, Covestro will expand its production capacities for TDI at the German site in Dormagen as early as 2023 through debottlenecking.
The Group is also investing in the “Solutions and Specialties” segment. Around EUR 300 million will be invested in additional capacities in the Coatings & Adhesives entity by 2025 to enable further growth. Covestro is expanding its compounding capacities for the global production of its highly differentiated polycarbonate. Future plans will focus entirely on this growth market in the area of polycarbonates. The company also sees growing demand for its Specialty Films products, particularly in the medical sector and for holographic films. To meet this demand, Covestro is investing around EUR 200 million in additional capacities by 2025.
Substantial increase in mid-cycle EBITDA up to 2024
Under its new strategy, Covestro reorganized its business into the two segments “Solutions and Specialties” and “Performance Materials” in July 2021. As part of that, the Group gave more entrepreneurial responsibility to the business entities and integrated all operational activities throughout the value chain that are critical to success directly into these new entities. As a result, it can better address the requirements of the specific markets and customers’ individual needs. In both segments, the Group expects an increase in core volumes sold by 2025. This is also expected to impact earnings: Whereas margins in the Performance Materials segment are highly supply-and-demand-driven, margins in the Solutions and Specialties segment are to be raised to 17 percent by 2024.
On the basis of the organizational realignment, the successful integration of the “Resins & Functional Materials” business acquired from DSM in April 2021, and sustainability-driven growth in demand, Covestro expects mid-cycle EBITDA to rise from its current level of EUR 2.2 billion to EUR 2.8 billion in 2024.
At the same time, the new Group structure offers significant efficiency potential that Covestro will leverage by 2023. The goal is to create the right basis for the long-term corporate development. As already announced, the company is currently reviewing all activities and processes worldwide to ascertain whether they fit with its vision and strategy. Overall, fixed costs in 2023 are to remain at the 2020 level.
Expansion of the sustainable product portfolio
On its path to becoming fully circular, Covestro is continuing its unwavering commitment to future technologies and constantly increasing its sustainable product portfolio. For example, the company has already successfully commercialized around 45 products based on alternative raw materials and is pressing ahead with almost 90 associated research products.
Key milestones on this path were achieved in 2021. The company now offers mass-balanced sustainable products from three sites (Antwerp in Belgium, Shanghai in China, and Krefeld-Uerdingen in Germany) that have been awarded ISCC Plus certification. This “International Sustainability and Carbon Certification” means Covestro can offer its customers high-performance plastic polycarbonate and the rigid foam precursor MDI both made from alternative raw materials in the same good quality as fossil-based counterparts. Covestro is thereby helping its customers reduce their carbon footprint.
https://www.covestro.com/investors/news/covestro-raises-investment-in-sustainable-growth/
September 28, 2021
Covestro MDI Expansion Plans
Higher costs drive re-examination of Covestro MDI plant location plans – CEO
Author: Tom Brown
2021/09/28
LONDON (ICIS)–A significant increase in construction costs in the US has become a factor in Covestro moving to re-examine the potential location of its planned flagship methylene diphenyl diisocyanate (MDI) plant, with China mooted as an alternative.
The company announced on Tuesday that it intends to proceed with work on a world-scale MDI plant, after suspending plans to build a unit in the US in early 2020.
The producer had announced in January 2020 that it would halt work on its planned 500,000 tonne/year MDI plant at its Baytown, Texas, production complex, in the face of challenging global market conditions.
A substantial increase in construction costs in the US, both in terms of labour and materials, since the project was first announced in 2018 could result in a lower return on capital employed (ROCE) than originally anticipated, prompting the re-examination of the location for the investment.
“Construction costs in the US have significantly increased, leading to a lower return on capital employed versus our original plan,” said Covestro CEO Markus Steilemann, speaking on an investor call.
“In China, construction costs have remained relatively flat, with attractive ROCE. Strong demand growth in China and Asia creates the need for another plant in Asia,” he added.
The company targets a return of at least seven percentage points above its cost of capital, according to CFO Thomas Toepfer, meaning a target ROCE of around 15%.
“That is certainly a challenge for a greenfield investment. But we think that we will be at least close to that, and therefore, this is also why we’re critically looking into all the options with respect to locations,” he said.
The company’s existing MDI assets are fully utilised at present, according to Steilemann, with a project to increase capacity at its Tarragona, Spain, plant, still underway but expected by 2025 instead of the initial estimate of 2022 when the project was first announced at the end of 2017.
“We are only able to grow below demand growth until the start-up of a new plant,” he said.
Covestro had originally guided for capital expenditure of $1.5bn for its new world-scale plant, but that figure may be set to rise irrespective of its final location in China or the US.
“I would say it’s not a secret that there has been significant cost inflation since [the project was announced], especially for materials like steel but also for labour, especially in the US, so this is one of the reasons why we are looking into all the options we have,” Steilemann said.
“Relative to the $1.5bn, there would be a slight increase to that in China, but there would certainly be a significant increase in the US,” he added.
A decision will be announced at the next stage of project development, he added, with the plant expected to be commissioned in 2026, two years after the original forecast start date for the Baytown project. The plant capacity is also likely to be around the originally forecast 500,000 tonnes/year, but the final figure is still to be determined.
OTHER INVESTMENTS
The firm is also planning to expand its toluene diisocyanate (TDI) production by de-bottlenecking facilities in Dormagen, Germany, expected to be complete by 2023. The unit currently has a production capacity of 250,000 tonnes/year, according to ICIS data.
Also earmarked for investment are coatings and adhesives, and specialty films, with planned expenditure of €300m and €200m apiece by 2025, while the firm is planning more investment in the circular economy.
“In order to achieve our ambitious objectives and become fully circular, we are planning targeted capex spending of around €1bn on circular economy projects over the next ten years,” Toepfer said.
Covestro is planning to increase capital spending over the next few years, with an estimated €800m of investment this year expected to expand substantially in the near future, he added.
On the back of new investments, the realignment of the business into solutions and specialties and performance materials in mid-2021, and the acquisition of DSM’s resins and functional materials business, Covestro expects to increase mid-cycle earnings before interest, taxes, depreciation and amortisation (EBITDA) from €2.2bn to €2.8bn by 2024, the company added.
(update re-leads, adds CEO, CFO comment)
September 28, 2021
Covestro MDI Expansion Plans
Higher costs drive re-examination of Covestro MDI plant location plans – CEO
Author: Tom Brown
2021/09/28
LONDON (ICIS)–A significant increase in construction costs in the US has become a factor in Covestro moving to re-examine the potential location of its planned flagship methylene diphenyl diisocyanate (MDI) plant, with China mooted as an alternative.
The company announced on Tuesday that it intends to proceed with work on a world-scale MDI plant, after suspending plans to build a unit in the US in early 2020.
The producer had announced in January 2020 that it would halt work on its planned 500,000 tonne/year MDI plant at its Baytown, Texas, production complex, in the face of challenging global market conditions.
A substantial increase in construction costs in the US, both in terms of labour and materials, since the project was first announced in 2018 could result in a lower return on capital employed (ROCE) than originally anticipated, prompting the re-examination of the location for the investment.
“Construction costs in the US have significantly increased, leading to a lower return on capital employed versus our original plan,” said Covestro CEO Markus Steilemann, speaking on an investor call.
“In China, construction costs have remained relatively flat, with attractive ROCE. Strong demand growth in China and Asia creates the need for another plant in Asia,” he added.
The company targets a return of at least seven percentage points above its cost of capital, according to CFO Thomas Toepfer, meaning a target ROCE of around 15%.
“That is certainly a challenge for a greenfield investment. But we think that we will be at least close to that, and therefore, this is also why we’re critically looking into all the options with respect to locations,” he said.
The company’s existing MDI assets are fully utilised at present, according to Steilemann, with a project to increase capacity at its Tarragona, Spain, plant, still underway but expected by 2025 instead of the initial estimate of 2022 when the project was first announced at the end of 2017.
“We are only able to grow below demand growth until the start-up of a new plant,” he said.
Covestro had originally guided for capital expenditure of $1.5bn for its new world-scale plant, but that figure may be set to rise irrespective of its final location in China or the US.
“I would say it’s not a secret that there has been significant cost inflation since [the project was announced], especially for materials like steel but also for labour, especially in the US, so this is one of the reasons why we are looking into all the options we have,” Steilemann said.
“Relative to the $1.5bn, there would be a slight increase to that in China, but there would certainly be a significant increase in the US,” he added.
A decision will be announced at the next stage of project development, he added, with the plant expected to be commissioned in 2026, two years after the original forecast start date for the Baytown project. The plant capacity is also likely to be around the originally forecast 500,000 tonnes/year, but the final figure is still to be determined.
OTHER INVESTMENTS
The firm is also planning to expand its toluene diisocyanate (TDI) production by de-bottlenecking facilities in Dormagen, Germany, expected to be complete by 2023. The unit currently has a production capacity of 250,000 tonnes/year, according to ICIS data.
Also earmarked for investment are coatings and adhesives, and specialty films, with planned expenditure of €300m and €200m apiece by 2025, while the firm is planning more investment in the circular economy.
“In order to achieve our ambitious objectives and become fully circular, we are planning targeted capex spending of around €1bn on circular economy projects over the next ten years,” Toepfer said.
Covestro is planning to increase capital spending over the next few years, with an estimated €800m of investment this year expected to expand substantially in the near future, he added.
On the back of new investments, the realignment of the business into solutions and specialties and performance materials in mid-2021, and the acquisition of DSM’s resins and functional materials business, Covestro expects to increase mid-cycle earnings before interest, taxes, depreciation and amortisation (EBITDA) from €2.2bn to €2.8bn by 2024, the company added.
(update re-leads, adds CEO, CFO comment)
September 28, 2021
Huntsman and KPX for JV
KPX Chemical and Huntsman form Joint Venture in Korea
Download as PDF September 28, 2021 2:00am EDT
Strategic alliance will provide Korean automakers with advanced polyurethane systems solutions
THE WOODLANDS, Texas, Sept. 28, 2021 /PRNewswire/ — KPX Chemical, a leading polyols producer for polyurethanes in Korea, and Huntsman Corporation (NYSE: HUN), a world-leading MDI-based polyurethanes and specialty chemical manufacturer, today announced the establishment of a joint venture named KPX HUNTSMAN POLYURETHANES AUTOMOTIVE CO., LTD. (KHPUA). The joint venture will create and provide innovative polyurethane system solutions to Korean automakers from a specialty polyurethanes manufacturing facility at KPX Chemical’s Ulsan plant. Operations are expected to commence by the end of October.
The Korean automotive industry is undergoing profound changes and presents new opportunities for high performance and light weight polyurethane system solutions. The new joint venture will accelerate growth in this sector by providing sustainable innovations and a high level of technical service support to its customers. KPX Chemical will leverage its 47-years’ experience in polyol technology and know-how by combining it with Huntsman’s proven ability to develop high performance, differentiated, MDI-based automotive solutions for vehicle manufacturers and its fully integrated global supply chain.
Tony Hankins, President of Huntsman’s Polyurethanes division and CEO of Huntsman Asia Pacific, said: “We are delighted to join forces with KPX Chemical. Korea is one of Huntsman’s key markets in Asia and driving continued business growth in the automotive industry is a priority for us. The new joint venture will create and provide customized polyurethane systems solutions to meet local automotive customers’ needs for improved comfort, superior acoustics and light-weighting. By creating value for its customers, KHPUA will enable downstream polyurethanes businesses to develop in a more sustainable way, both economically and environmentally.”
Kim Moon-young, President of KPX Chemical, said: “This cooperation is of great strategic significance to both parties. Together, under the banner of KHPUA, we will leverage the R&D and capacity advantages of KPX Chemical and Huntsman in the region to become the industry’s preferred innovation partner. It is an exciting time to be creating a new venture and we look forward to working with key players in the region to meet growing demand for autonomous vehicles and electric transport solutions that can support the country’s carbon neutrality ambitions.”
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