Company News

October 26, 2018

Covestro Q3 Results

Covestro: Solid results in an increasingly challenging market environment

Cost savings targeted at EUR 350 million per year

25-Oct-2018

Covestro continued its positive business performance in 2018 with a solid third quarter in an increasingly challenging market environment. Group sales grew by 4.8% to EUR 3.7 billion over the same quarter in 2017 thanks to higher selling prices and volumes sold. Core volumes were up marginally by 0.2%, remaining at last year’s level despite limited product availability. At EUR 859 million, the Group’s EBITDA also matched the prior year period. Declining margins in the Polyurethanes segment were offset by higher margins in the Polycarbonates segment. Net income rose slightly by 1.0% to EUR 496 million. Earnings per share advanced by 6.6% to EUR 2.59, supported by the ongoing share buyback. Free operating cash flow (FOCF) was down 12.2% to EUR 578 million due to increased investments.

Dr. Markus Steilemann, CEO of Covestro, said: “We are continuing on a successful path. The investments we have decided on point us in our future direction and lay the foundation for organic growth going forward. We will expand our capacities in all segments and thereby strengthen our leading position in attractive industries growing faster than the global economy. Our efficiency program will also improve cost structures over the medium term.”

With investments totaling around EUR 1.5 billion, Covestro recently announced the expansion of its MDI capacity in Baytown, Texas (United States). There, a new world-scale plant is expected to produce 500 kilotons of MDI per year by 2024. At the same time, investment projects are underway in Brunsbüttel (Germany), Tarragona (Spain), Antwerp (Belgium), and Caojing (China) to boost Covestro’s capacity to produce MDI and its precursors in order to benefit from global market growth. The MDI market is projected to grow by around 5% per year in the long term, exceeding global GDP by some 2 percentage points.

Covestro is also committed to developing innovative products driven mainly by sustainability: Since fall 2018, the company has marketed the first representative in a new series of thermoplastic polyurethanes manufactured with the help of CO2-based raw materials. Compared with conventional materials, these new polyurethanes have a smaller ecological footprint and therefore contribute to meeting the demand for more sustainable solutions.

Full year guidance confirmed

Dr. Thomas Toepfer, CFO of Covestro, stated: “The third quarter met our expectations. We are seeing increasingly challenging economic conditions and also experienced limited product availability in Europe and Asia in the past quarter. Nonetheless, we were able to keep volumes stable. In this context, we today confirm our guidance for 2018.”

Covestro aims for a low- to mid-single-digit percentage increase of core volumes for full year 2018. Free operating cash flow is expected to be above EUR 2 billion. The company expects ROCE around previous year’s level, while continuing to project EBITDA above previous year’s level.

In the past quarter, Covestro continued its share buyback program, launching the third tranche in August. Since the beginning of the program, shares totaling some EUR 1.2 billion, or nearly 8% of capital stock, have been repurchased. Overall, Covestro aims to buy back own shares totaling up to EUR 1.5 billion, or up to 10% of its capital stock by mid-2019.

Cost savings targeted at EUR 350 million per year

Simultaneously, Covestro is making good progress with another strategic lever: The company’s stepped up cross-division collaboration and increased use of digital solutions are anticipated to boost effectiveness and efficiency markedly. By 2021 at the latest, the cost savings are estimated at around EUR 350 million per year with the goal of limiting the increase in operational costs. The measures identified are intended mainly to permanently reduce non-labor costs, although roughly 900 full-time positions will be reduced worldwide, e.g., in administrative areas. The job reductions will be carried out by way of socially acceptable solutions that have already been agreed with the Works Council in Germany.

Strong growth in Polycarbonates and Coatings, Adhesives, Specialties

In the Polyurethanes segment, sales decreased marginally in the third quarter of 2018, by 1.2% to EUR 1,849 million. A decline in sales in the EMLA and APAC regions was balanced out by an increase in the NAFTA region. Price changes, currency effects, and unplanned plant downtime had negative effects. Core volumes in the Polyurethanes segment dropped by 2.0%. EBITDA in the segment was down 21.5% to EUR 432 million. This was attributable mainly to rising purchase prices for raw materials.

The Polycarbonates segment continued to see strong growth in the third quarter, registering an 11.3% increase in sales to EUR 1,038 million. A rise in core volumes (up 2.6%) and higher selling prices positively impacted sales. Sales in the EMLA and APAC regions grew substantially, balancing out a decline in the NAFTA region. The Polycarbonates segment’s EBITDA benefited from higher margins and prices, rising 49.3% to EUR 315 million. This result also includes non-recurring income of EUR 36 million from the sale of the U.S. sheet business.

In the Coatings, Adhesives, Specialties segment, sales increased 8.8% to EUR 606 million. All regions contributed to the growth in sales. In the third quarter, the segment’s core volumes also increased sharply, expanding by 7.2%. EBITDA was EUR 126 million, around the previous year’s level (+0.8%).

Successful business performance in the first nine months of 2018

In the first nine months, Covestro has already built a solid overall foundation for the year as a whole. Cumulatively, core volumes were up 1.5% over the previous year’s figures. Sales climbed 6.9% to EUR 11.3 billion, and EBITDA jumped 13.7% to EUR 2.9 billion. In addition, the company increased free operating cash flow by 9.9% to EUR 1.3 billion.

http://www.chemeurope.com/en/news/1158079/covestro-solid-results-in-an-increasingly-challenging-market-environment.html

October 26, 2018

BASF Q3 Results

BASF Group increases sales – earnings below prior-year quarter

  • Sales grow to €15.6 billion (plus 8%), largely driven by higher sales prices in all segments (plus 6%) as well as higher volumes (plus 2%)
  • EBIT before special items of €1.5 billion (minus 14%), mainly due to lower contribution from Chemicals segment
  • Net income of €1.2 billion (minus 10%)

2018 outlook adjusted following signing of agreement to merge Wintershall and DEA:

  • Slight sales growth
  • Slight decrease in EBIT before special items
  • Considerable decline in EBIT

In the third quarter of 2018, BASF Group sales rose by 8% year on year to reach €15.6 billion. This was primarily attributable to higher sales prices in all segments. Volumes growth and the acquisition of the Bayer businesses in August 2018 also contributed to the sales increase. Negative currency effects had an offsetting impact. Income from operations (EBIT) before special items declined by €232 million to €1.5 billion, mainly due to the significantly lower contribution from the Chemicals segment. EBIT before special items also decreased considerably in the Functional Materials & Solutions and Agricultural Solutions segments, but fell only slightly in the Performance Products segment. This was partially offset by improved earnings in Other.

Special items in EBIT totaled minus €75 million in the third quarter of 2018, compared with €122 million in the prior-year quarter. In addition to the integration costs incurred in connection with the acquisition of significant businesses and assets from Bayer, expenses for restructuring measures and other charges also contributed here. The prior-year quarter included special income in the Performance Products segment from the transfer of BASF’s leather chemicals business to the Stahl group. Compared to the third quarter of 2017, EBIT therefore declined by €429 million to €1.4 billion. Income from operations before depreciation, amortization and special items (EBITDA before special items) decreased by €254 million to €2.3 billion and EBITDA by €465 million to €2.2 billion.

At the presentation of BASF Group’s quarterly figures, Chairman of the Board of Executive Directors Dr. Martin Brudermüller and Chief Financial Officer Dr. Hans-Ulrich Engel pointed to some of the special factors in the third quarter: “We completed the acquisition of significant businesses and assets from Bayer and reached an agreement on the merger of Wintershall and DEA,” said Brudermüller. After the transaction agreement between BASF and LetterOne was signed, it was necessary to adjust the financial reporting retroactively as of January 1, 2018. The prior-year figures were also restated accordingly.

The low water level in the Rhine River had an impact on business. “Throughout the entire third quarter, we had to struggle with this, which led to production cutbacks and higher transportation costs,” said Brudermüller. And the reporting period is being compared to the BASF Group’s very strong third quarter of 2017, when the business climate was considerably more favorable in comparison. Brudermüller said: “The challenges in the macroeconomic environment are growing. You can see this in our third-quarter 2018 results.”

Outlook for the full year 2018
Growth in industrial production fell short of expectations in the third quarter of 2018, primarily due to developments in the automotive industry in September in particular. The introduction of new emission standards had an impact in Europe. The effects of the trade conflict between the United States and China are also showing. This is leading to a slowdown in economic growth in Asia in particular, mainly in China.

BASF therefore adjusted its assessment of the global economic environment in 2018 as follows (forecast from the BASF Half-Year Financial Report 2018 in parentheses):

  • Growth in gross domestic product: 3.0% (3.0%)
  • Growth in industrial production: 3.1% (3.2%)
  • Growth in chemical production: 3.1% (3.4%)
  • Average euro/dollar exchange rate of $1.20 per euro ($1.20 per euro)
  • Average Brent blend oil price for the year of $70 per barrel ($70 per barrel)

The signing of the definitive transaction agreement on the merger of Wintershall and DEA reduces the BASF Group’s sales and EBIT by the contribution of its oil and gas activities – retroactively as of January 1, 2018, and with the prior-year figures restated – due to their presentation as discontinued operations.

As a result of this, the BASF Group’s forecast for the full year 2018 made in the 2017 report was adjusted at the end of September (previous forecast from the BASF Report 2017 in parentheses):

  • Slight sales growth (slight growth)
  • Slight decrease in EBIT before special items (slight increase)
  • Considerable decline in EBIT (slight decline)

https://www.basf.com/en/company/news-and-media/news-releases/2018/10/p-18-343.html

October 26, 2018

BASF Q3 Results

BASF Group increases sales – earnings below prior-year quarter

  • Sales grow to €15.6 billion (plus 8%), largely driven by higher sales prices in all segments (plus 6%) as well as higher volumes (plus 2%)
  • EBIT before special items of €1.5 billion (minus 14%), mainly due to lower contribution from Chemicals segment
  • Net income of €1.2 billion (minus 10%)

2018 outlook adjusted following signing of agreement to merge Wintershall and DEA:

  • Slight sales growth
  • Slight decrease in EBIT before special items
  • Considerable decline in EBIT

In the third quarter of 2018, BASF Group sales rose by 8% year on year to reach €15.6 billion. This was primarily attributable to higher sales prices in all segments. Volumes growth and the acquisition of the Bayer businesses in August 2018 also contributed to the sales increase. Negative currency effects had an offsetting impact. Income from operations (EBIT) before special items declined by €232 million to €1.5 billion, mainly due to the significantly lower contribution from the Chemicals segment. EBIT before special items also decreased considerably in the Functional Materials & Solutions and Agricultural Solutions segments, but fell only slightly in the Performance Products segment. This was partially offset by improved earnings in Other.

Special items in EBIT totaled minus €75 million in the third quarter of 2018, compared with €122 million in the prior-year quarter. In addition to the integration costs incurred in connection with the acquisition of significant businesses and assets from Bayer, expenses for restructuring measures and other charges also contributed here. The prior-year quarter included special income in the Performance Products segment from the transfer of BASF’s leather chemicals business to the Stahl group. Compared to the third quarter of 2017, EBIT therefore declined by €429 million to €1.4 billion. Income from operations before depreciation, amortization and special items (EBITDA before special items) decreased by €254 million to €2.3 billion and EBITDA by €465 million to €2.2 billion.

At the presentation of BASF Group’s quarterly figures, Chairman of the Board of Executive Directors Dr. Martin Brudermüller and Chief Financial Officer Dr. Hans-Ulrich Engel pointed to some of the special factors in the third quarter: “We completed the acquisition of significant businesses and assets from Bayer and reached an agreement on the merger of Wintershall and DEA,” said Brudermüller. After the transaction agreement between BASF and LetterOne was signed, it was necessary to adjust the financial reporting retroactively as of January 1, 2018. The prior-year figures were also restated accordingly.

The low water level in the Rhine River had an impact on business. “Throughout the entire third quarter, we had to struggle with this, which led to production cutbacks and higher transportation costs,” said Brudermüller. And the reporting period is being compared to the BASF Group’s very strong third quarter of 2017, when the business climate was considerably more favorable in comparison. Brudermüller said: “The challenges in the macroeconomic environment are growing. You can see this in our third-quarter 2018 results.”

Outlook for the full year 2018
Growth in industrial production fell short of expectations in the third quarter of 2018, primarily due to developments in the automotive industry in September in particular. The introduction of new emission standards had an impact in Europe. The effects of the trade conflict between the United States and China are also showing. This is leading to a slowdown in economic growth in Asia in particular, mainly in China.

BASF therefore adjusted its assessment of the global economic environment in 2018 as follows (forecast from the BASF Half-Year Financial Report 2018 in parentheses):

  • Growth in gross domestic product: 3.0% (3.0%)
  • Growth in industrial production: 3.1% (3.2%)
  • Growth in chemical production: 3.1% (3.4%)
  • Average euro/dollar exchange rate of $1.20 per euro ($1.20 per euro)
  • Average Brent blend oil price for the year of $70 per barrel ($70 per barrel)

The signing of the definitive transaction agreement on the merger of Wintershall and DEA reduces the BASF Group’s sales and EBIT by the contribution of its oil and gas activities – retroactively as of January 1, 2018, and with the prior-year figures restated – due to their presentation as discontinued operations.

As a result of this, the BASF Group’s forecast for the full year 2018 made in the 2017 report was adjusted at the end of September (previous forecast from the BASF Report 2017 in parentheses):

  • Slight sales growth (slight growth)
  • Slight decrease in EBIT before special items (slight increase)
  • Considerable decline in EBIT (slight decline)

https://www.basf.com/en/company/news-and-media/news-releases/2018/10/p-18-343.html

October 26, 2018

BASF Investors’ Slides

Considering action on Construction Chemicals business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isocyanate Margins “normalize”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

https://seekingalpha.com/article/4214815-basf-se-adr-2018-q3-results-earnings-call-slides

 

October 26, 2018

BASF Investors’ Slides

Considering action on Construction Chemicals business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isocyanate Margins “normalize”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

https://seekingalpha.com/article/4214815-basf-se-adr-2018-q3-results-earnings-call-slides