Covestro (1COV) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw a 9.3% year-over-year increase in sales volumes, but lower prices and FX headwinds kept sales stable at €3.7 billion; EBITDA for Q2 was €320 million, down 17% year-over-year and at the midpoint of guidance.

• Free operating cash flow was negative €147 million in Q2 and negative €276 million for H1 2024, reflecting seasonal patterns, bonus payouts, and lower EBITDA.

• Net loss after taxes was €111 million in H1 2024, compared to net income of €18 million in H1 2023; EPS dropped to €-0.57.

• The STRONG transformation program was launched, targeting €400 million in annual savings by 2028, with €300 million in restructuring costs and €23 million already incurred in Solutions & Specialties.

• Negotiations with ADNOC are ongoing for a potential transaction at €62 per share, with due diligence and investment agreement discussions in progress.

Financial highlights

• Q2 2024 sales were €3.7 billion, stable year-over-year as volume gains offset a 9.7% price decline and minor FX headwinds; EBITDA was €320 million, down 16.9% year-over-year.

• H1 2024 sales declined 3.5% year-over-year to €7,200 million; EBITDA fell 11.6% to €593 million.

• Net financial debt increased by €441 million since year-end 2023, reaching €2,928 million.

• Equity rose by €56 million to €6,674 million, mainly due to actuarial gains and FX effects, despite the net loss.

• No dividend was paid for fiscal 2023 due to a net loss.

Outlook and guidance

• Full-year 2024 EBITDA guidance narrowed to €1,000–1,400 million; mark-to-market EBITDA at €1,200 million.

• Free operating cash flow guidance adjusted to €-100 million to €100 million for 2024.

• ROCE above WACC narrowed to -7 to -4 percentage points.

• Q3 2024 EBITDA expected between €250–350 million.

• Performance Materials EBITDA expected at €400–700 million; Solutions & Specialties EBITDA projected to be on par with 2023.