The Urethane Blog

Covestro Beats

Covestro Leaps On Surprise Share Buy Back and Massive Earnings Beat

The German plastics maker gained 6% after posting a 50% Ebitda increase and announcing a share buyback, handing Bayer more firepower to fund its Monsanto takeover.


Covestro AG, the German plastics business spun out of Bayer AG (BAYRY) , jumped more than 6% on Tuesday after smashing third quarter revenues and earnings expectations and announcing a €1.5 billion ($1.76 billion) share buyback.

Covestro posted adjusted Ebitda of €862 million, up 50.2% year-on-year, on sales of €3.5 billion, up 16.9%, as demand for its key polyurethane products outstripped supply pushing prices almost 30% higher year-on-year. The EBITDA result was 7.3% ahead of analyst consensus.

Covestro shares were among the best performers on the German market on Tuesday, Oct. 24, climbing to an all-time high of over €77.07 in early trading before dropping back to €76.40, up €4.28 or about 6%.

“We are currently enjoying tremendous growth momentum and we are delivering records in revenues, profitability and cash generation,” said CEO Patrick Thomas. “The extraordinary cash generation provides us, earlier than originally expected, with the opportunity to return significant amounts of cash to our shareholders while preserving the ability to consider bolt-on acquisition opportunities.”

Covestro had previously said that it would retain cash for acquisitions and had suggested that a share buyback would not be considered until 2019. The share buyback, which could account for as much as 10% of Covestro’s stock, is expected to commence in the fourth quarter of this year and will run for almost two years.