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Covestro AG
Quarterly Report • Oct 30, 2024
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Quarterly Report
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Quarterly Statement 2024
THIRD QUARTER
Contents
Table of contents
Covestro Group Key Data ..... 3
Significant Events after the End of the Reporting Period ..... 4
Results of Operations and Financial Position of the Covestro Group ..... 5
Performance of the Segments ..... 7
Forecast, Opportunities, and Risks. ..... 10
Covestro Group Consolidated Income Statement ..... 13
Covestro Group Consolidated Statement of Comprehensive Income ..... 14
Covestro Group Consolidated Statement of Financial Position ..... 15
Covestro Group Consolidated Statement of Cash Flows ..... 16
Employees and Pension Obligations ..... 17
Exchange Rates ..... 17
Scope of Consolidation ..... 18
Segment Information ..... 19
Financial Calendar ..... 21
Reporting principles
This Quarterly Statement of Covestro AG, Leverkusen (Germany), was prepared in accordance with Section 53 of the Stock Exchange Rules and Regulations (Börsenordnung) of the Frankfurt Stock Exchange. It does not comprise an interim report within the meaning of IAS 34 (Interim Financial Reporting) or a set of financial statements within the meaning of IAS 1 (Presentation of Financial Statements). It was not subjected to a review by an auditor. This Quarterly Statement contains information on the period from July 1 to September 30, 2024 and should be read alongside the Annual Report 2023 and the additional information contained therein, as well as the Half-Year Financial Report 2024. The Annual Report 2023 and the Half-Year Financial Report 2024 are available on our website at www.covestro.com.
Forward-looking statements
This Quarterly Statement may contain forward-looking statements based on current assumptions and forecasts made by the management of Covestro AG, Leverkusen (Germany). Various known and unknown risks, uncertainties, and other factors could lead to material differences between the actual results, financial situation, development, or performance of the Covestro Group and the estimates given here. The various factors include those discussed in Covestro AG's public reports, which are available at www.covestro.com. Covestro AG assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.
Acronyms and Abbreviations
Acronyms and abbreviations used in this Quarterly Statement are explained in this Quarterly Statement or in the Glossary provided in the Annual Report 2023.
Rounding and Percentage Deviations
As the indicators in this Quarterly Statement are stated in accordance with commercial rounding principles, totals and percentages may not always be exact.
If a deviation changes from positive to negative or vice versa, or if it is greater than 1,000\%, this is shown by a period.
Inclusive Language
Diversity, equity, and inclusion are important to Covestro. To ensure better readability, we therefore strive to use gender-neutral language and avoid gender-specific terms in this Quarterly Statement. All terms should be taken to apply equally to all genders.
Publication
This Quarterly Statement was published in German and English on October 29, 2024. The German version is binding.
Covestro Group Key Data
| 3rd quarter 2023 | 3rd quarter 2024 | Change | 1st nine months 2023 | 1st nine months 2024 | Change | |
|---|---|---|---|---|---|---|
| Sales | €3,568 million | €3,603 million | 1.0\% | €11,031 million | €10,803 million | $-2.1 \%$ |
| Change in sales | ||||||
| Volume | $-3.8 \%$ | $6.1 \%$ | $-9.5 \%$ | $8.7 \%$ | ||
| Price | $-14.3 \%$ | $-4.2 \%$ | $-9.7 \%$ | $-9.8 \%$ | ||
| Currency | $-4.6 \%$ | $-0.9 \%$ | $-2.0 \%$ | $-1.0 \%$ | ||
| Sales by region | ||||||
| EMLA ${ }^{1}$ | €1,387 million | €1,460 million | $5.3 \%$ | €4,634 million | €4,513 million | $-2.6 \%$ |
| $\mathrm{NA}^{2}$ | €936 million | €894 million | $-4.5 \%$ | €2,889 million | €2,678 million | $-7.3 \%$ |
| APAC ${ }^{3}$ | €1,245 million | €1,249 million | $0.3 \%$ | €3,508 million | €3,612 million | $3.0 \%$ |
| EBITDA ${ }^{4}$ | €277 million | €287 million | 3.6\% | €948 million | €880 million | $-7.2 \%$ |
| Changes in EBITDA | ||||||
| Volume | $-7.0 \%$ | $33.2 \%$ | $-26.3 \%$ | $38.7 \%$ | ||
| Price | $-218.5 \%$ | $-54.2 \%$ | $-82.1 \%$ | $-114.6 \%$ | ||
| Raw material price | $241.4 \%$ | $8.7 \%$ | $59.3 \%$ | $63.2 \%$ | ||
| Currency | $-15.2 \%$ | $-0.7 \%$ | $-3.8 \%$ | $-1.9 \%$ | ||
| Other ${ }^{5}$ | $-8.9 \%$ | $16.6 \%$ | $10.2 \%$ | $7.4 \%$ | ||
| EBIT ${ }^{6}$ | €71 million | €76 million | 7.0\% | €276 million | €218 million | $-21.0 \%$ |
| Financial result | (€35 million) | (€24 million) | $-31.4 \%$ | (€100 million) | (€83 million) | $-17.0 \%$ |
| Net income ${ }^{7}$ | (€31 million) | €33 million | (€11 million) | (€74 million) | 572.7\% | |
| Earnings per share ${ }^{8}$ | (€0.16) | €0.17 | (€0.06) | (€0.99) | 550.0\% | |
| Cash flows from operating activities ${ }^{9}$ | €490 million | €262 million | $-46.5 \%$ | €620 million | €258 million | $-58.4 \%$ |
| Cash outflows for additions to property, plant, equipment and intangible assets | €182 million | €150 million | $-17.6 \%$ | €461 million | €422 million | $-8.5 \%$ |
| Free operating cash flow ${ }^{10}$ | €308 million | €112 million | $-63.6 \%$ | €159 million | (€164 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.
${ }^{4}$ Earnings before interest, taxes, depreciation and amortization (EBITDA): EBIT plus depreciation, amortization, and impairment losses; less impairment loss reversals on property, plant and equipment and intangible assets.
${ }^{5}$ Other changes in EBITDA such as changes in provisions for variable compensation.
${ }^{6}$ Earnings before interest and taxes (EBIT): income after income taxes plus financial result and income taxes.
${ }^{7}$ Net income: income after income taxes attributable to the shareholders of Covestro AG.
${ }^{8}$ Earnings per share: according to IAS 33 (Earnings per Share), net income divided by the weighted average number of outstanding no-par value voting shares of Covestro AG. The calculation was based on 188,740,330 no-par shares for the third quarter of 2024 (previous year: 188,740,330 no-par shares) and on 188,740,330 no-par shares for the first nine months of 2024 (previous year: 188,438,057 no-par shares).
${ }^{9}$ Cash flows from operating activities according to IAS 7 (Statement of Cash Flows).
${ }^{10}$ Free operating cash flow (FOCF): cash flows from operating activities less cash outflows for additions to property, plant, equipment and intangible assets.
Significant Events after the End of the Reporting Period
Signing of Investment Agreement with ADNOC
On October 1, 2024, Covestro AG signed an investment agreement with certain ADNOC Group companies, including ADNOC International Limited ("ADNOC International") and its subsidiary ADNOC International Germany Holding AG ("Bidder"). The investment agreement specifies, among other things, that the Bidder will submit a public takeover offer to the shareholders of Covestro AG for all outstanding Covestro shares at a price of $€ 62.00$. At the same time, the Board of Management and Supervisory Board of Covestro AG resolved that, on completion of the transaction, the company's capital stock should be increased by 10\% (18,900,000 shares) and that, on and subject to completion, the new shares will be issued to the Bidder against payment of a price per share in the amount of the offer price, i.e., based on the offer price of $€ 62.00$, for a total amount of $€ 1.17$ billion, with simplified disapplication of subscription rights. In addition, in this agreement, ADNOC International commits itself to supporting without limitations the Sustainable Future corporate strategy.
The offer will be subject to a minimum acceptance ratio of 50\% plus one share and the normal conditions of completion, including antitrust and foreign trade clearance, and clearance under EU law on foreign subsidies.
In accordance with the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG), the offer document and other information relevant to the Bidder's public takeover offer have been made available on the following website after approval by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin): www.covestro-offer.com.
Following a detailed examination, the Supervisory Board and the Board of Management of Covestro AG welcome and support the takeover offer announced by the Bidder. They will carefully examine the offer document once it has been published and issue a reasoned opinion in accordance with section 27 WpÜG. Subject to the examination of the offer document, the Board of Management and Supervisory Board of Covestro AG expect that they will recommend to the company's shareholders to accept the offer.
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).
Sales by segment and region
€ million, prior-year figures in brackets
Others/Consolidation
53 (52)
[^0]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).
[^0]: ${ }^{1}$ 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.
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.
Performance of the Segments
Performance Materials
Performance Materials key data
| 3rd quarter 2023 |
3rd quarter 2024 |
Change | 1st nine months 2023 | 1st nine months 2024 | Change | |
|---|---|---|---|---|---|---|
| Sales (external) | €1,707 million | €1,777 million | 4.1\% | €5,288 million | €5,300 million | 0.2\% |
| Intersegment sales | €542 million | €591 million | 9.0\% | €1,706 million | €1,718 million | 0.7\% |
| Sales (total) | €2,249 million | €2,368 million | 5.3\% | €8,994 million | €7,018 million | 0.3\% |
| Change in sales (external) | ||||||
| Volume | $-2.4 \%$ | 8.6\% | $-10.4 \%$ | 13.6\% | ||
| Price | $-19.9 \%$ | $-3.6 \%$ | $-14.1 \%$ | $-12.4 \%$ | ||
| Currency | $-4.4 \%$ | $-0.9 \%$ | $-1.8 \%$ | $-1.0 \%$ | ||
| Sales by region (external) | ||||||
| EMLA | €695 million | €779 million | 12.1\% | €2,347 million | €2,363 million | 0.7\% |
| NA | €465 million | €452 million | $-2.8 \%$ | €1,430 million | €1,320 million | $-7.7 \%$ |
| APAC | €547 million | €546 million | $-0.2 \%$ | €1,511 million | €1,617 million | 7.0\% |
| EBITDA ${ }^{1}$ | €85 million | €125 million | 47.1\% | €560 million | €424 million | $-24.3 \%$ |
| EBIT ${ }^{1}$ | (€52 million) | (€11 million) | $-78.8 \%$ | €135 million | €13 million | $-90.4 \%$ |
| Cash flows from operating activities | €438 million | €199 million | $-54.6 \%$ | €483 million | €219 million | $-54.7 \%$ |
| Cash outflows for additions to property, plant, equipment and intangible assets | €121 million | €88 million | $-27.3 \%$ | €300 million | €270 million | $-10.0 \%$ |
| Free operating cash flow | €317 million | €111 million | $-65.0 \%$ | €183 million | (€51 million) |
${ }^{1}$ EBIT and EBITDA include the effect on earnings of intersegment sales.
In the Performance Materials segment, third-quarter sales in 2024 were up 4.1\% to €1,777 million (previous year: $€ 1,707$ million). The main driver of this trend was an increase in volumes sold, especially in the EMLA region, which had a beneficial effect on sales of $8.6 \%$. Offsetting changes were a $3.6 \%$ decline in average selling prices due to oversupply in the market, which coincided with lower raw material prices being passed on to customers as well as exchange rate movements with a sales-reducing effect of $0.9 \%$.
Sales in the EMLA region were up by 12.1\% from the corresponding prior-year quarter to $€ 779$ million (previous year: $€ 695$ million), driven primarily by a substantial increase in sales volumes. The lower selling price level, on the other hand, had a slight reducing impact on sales. Exchange rate movements had a neutral aggregate impact on sales in aggregate. The NA region's sales decreased by 2.8\% to $€ 452$ million (previous year: $€ 465$ million), principally because of exchange rate movements and lower sales volumes, both of which had the effect of slightly reducing sales. The selling price level had no notable effect on sales. Sales in the APAC region were down by $0.2 \%$ to $€ 546$ million (previous year: $€ 547$ million), with the effects on sales of a marginal decrease in the selling price level and a slight rise in volumes sold almost completely offsetting each other. Exchange rate movements had no notable impact on sales.
In the third quarter of 2024, EBITDA in the Performance Materials segment was up 47.1\% on the corresponding prior-year quarter, rising to $€ 125$ million (previous year: $€ 85$ million), driven mainly by higher sales volumes. At the same time, additional government subsidies to compensate for electricity prices in Germany and lower provisions for variable compensation had a positive effect on earnings. In contrast, lower margins had an reducing effect on earnings, since the decline in the average selling price level could not be compensated for by lower raw material and energy prices. Exchange rate movements had no notable impact on EBITDA.
In the third quarter of 2024, EBIT improved to $€-11$ million (previous year: $€-52$ million).
Free operating cash flow retreated to $€ 111$ million in the third quarter of 2024 (previous year: $€ 317$ million), mainly because of significantly lower funds freed up from working capital compared with the prior-year quarter. On the other hand, a rise in EBITDA and lower cash outflows for property, plant and equipment and intangible assets had a positive effect on free operating cash flow.
Solutions \& Specialties
Solutions \& Specialties key data
| 3rd quarter 2023 |
3rd quarter 2024 |
Change | 1st nine months 2023 | 1st nine months 2024 | Change | |
|---|---|---|---|---|---|---|
| Sales (external) | €1,809 million | €1,773 million | $-2.0 \%$ | €5,564 million | €5,350 million | $-3.8 \%$ |
| Intersegment sales | 66 million | €7 million | $16.7 \%$ | €21 million | €20 million | $-4.6 \%$ |
| Sales (total) | €1,815 million | €1,780 million | $-1.9 \%$ | €5,585 million | €5,370 million | $-3.8 \%$ |
| Change in sales (external) | ||||||
| Volume | $-3.7 \%$ | $3.9 \%$ | $-8.0 \%$ | $4.9 \%$ | ||
| Price | $-8.9 \%$ | $-4.9 \%$ | $-5.3 \%$ | $-7.7 \%$ | ||
| Currency | $-5.0 \%$ | $-1.0 \%$ | $-2.2 \%$ | $-1.0 \%$ | ||
| Sales by region (external) | ||||||
| EMLA | €653 million | €640 million | $-2.0 \%$ | €2,144 million | €2,029 million | $-5.4 \%$ |
| NA | €461 million | €434 million | $-5.9 \%$ | €1,433 million | €1,335 million | $-6.8 \%$ |
| APAC | €695 million | €699 million | $0.6 \%$ | €1,987 million | €1,986 million | $-0.1 \%$ |
| EBITDA ${ }^{1}$ | €246 million | €208 million | $-15.4 \%$ | €632 million | €590 million | $-6.6 \%$ |
| EBIT ${ }^{1}$ | €178 million | €134 million | $-24.7 \%$ | €390 million | €344 million | $-11.8 \%$ |
| Cash flows from operating activities | €247 million | €162 million | $-34.4 \%$ | €447 million | €303 million | $-32.2 \%$ |
| Cash outflows for additions to property, plant, equipment and intangible assets | €62 million | €61 million | $-1.6 \%$ | €160 million | €144 million | $-10.0 \%$ |
| Free operating cash flow | €185 million | €101 million | $-45.4 \%$ | €287 million | €159 million | $-44.6 \%$ |
${ }^{1}$ EBIT and EBITDA include the effect on earnings of intersegment sales.
In the Solutions \& Specialties segment, third-quarter sales in 2024 were down 2.0\% to $€ 1,773$ million (previous year: $€ 1,809$ million). This was mainly driven by a demand-induced $4.9 \%$ decline in average selling prices, which coincided with a reduction in raw material prices being passed on to customers, as well as exchange rate movements, which had a sales-reducing effect of $1.0 \%$. This stood against a rise in volumes sold, which had an increasing effect on sales amounting to $3.9 \%$.
The EMLA region's sales decreased 2.0\% to $€ 640$ million (previous year: $€ 653$ million), driven by significantly lower average selling prices. In contrast, higher volumes sold had the effect of increasing sales slightly. Exchange rate movements had no notable effect on sales. The NA region's sales decreased 5.9\% to $€ 434$ million (previous year: $€ 461$ million), due especially to a lower selling price level and exchange rate movements, both of which had a slight reducing effect on sales. Changes in volumes sold had no notable effect on sales. Sales in the APAC region were up by 0.6\% to $€ 699$ million (previous year: $€ 695$ million), driven primarily by a significant increase in sales volumes. This effect was partially offset by lower average selling prices, which had a slight sales-reducing impact. Exchange rate movements had no notable effect on sales.
In the third quarter of 2024, EBITDA in the Solutions \& Specialties segment was down 15.4\% on the corresponding prior-year quarter, declining to $€ 208$ million (previous year: $€ 246$ million); this was predominantly due to lower margins, since the decline in average selling prices could not be compensated for by lower raw material and energy prices. Another factor contributing to lower earnings than in the corresponding prior-year quarter was a reduced amount of business development subsidies received in China attributable to the segment. On the other hand, higher sales volumes and a change in provisions for short-term variable compensation had a beneficial effect on earnings. Exchange rate movements had no notable impact.
In the third quarter of 2024, EBIT decreased by 24.7\% to €134 million (previous year: €178 million).
Free operating cash flow was down, amounting to €101 million in the third quarter of 2024 (previous year: €185 million), largely due to a higher amount of cash tied up in working capital, which compares to cash freed up in the corresponding prior-year quarter. In addition, lower EBITDA had a negative effect on free operating cash flow.
Forecast, Opportunities, and Risks
Economic Outlook
Global Economy
For the 2024 fiscal year, we expect global economic output to improve slightly - now by $2.7 \%$ - compared with the outlook given in the Annual Report 2023. The global economy will stay on a solid growth path, driven by robust economic data and improved growth prospects in the regions. Inflation seems to be largely under control and cuts in key interest rates by central banks in all regions are expected to build positive momentum for economic development in all regions.
For the EMLA region, we expect the economy to grow by $1.5 \%$, and therefore more slowly than the global economy, in the year 2024. Although Latin America and the Middle East are expected to see stronger growth, Europe has experienced weak economic momentum in the year 2024 to date, and according to forecasts this will not improve by the end of the year.
For the NA region, we project growth of $2.5 \%$, which is virtually on a level with the global growth outlook. Economic growth in the United States in the second quarter, which was stronger than expected, and an inflation rate approaching the Federal Reserve's target are supporting the forecasts for this region. The significant cut in the United States' key interest rate in September 2024 means that robust economic development can be expected to continue in the NA region. Although the labor market is weakening and the unemployment rate is going up, the risks of a significant deterioration in economic performance are low.
For the APAC region, we expect the economy to expand by $3.9 \%$ in 2024, and therefore faster than the global economy, driven by a strong export market and fiscal policy measures in China. Although the latest announcements of extensive economic measures in China prompt expectations of positive effects on economic growth, the region continues to be exposed to growth risks.
Economic growth ${ }^{1}$
| Growth 2023 | Growth forecast 2024 (Annual Report 2023) | Growth forecast 2024 |
|
|---|---|---|---|
| \% | \% | \% | |
| World | 2.8 | 2.4 | 2.7 |
| Europe, Middle East, Latin America ${ }^{2}$, Africa (EMLA) | 1.3 | 1.2 | 1.5 |
| of which Europe | 1.0 | 0.9 | 1.3 |
| of which Germany | $-0.1$ | $-0.1$ | $-0.1$ |
| of which Middle East | 1.3 | 3.0 | 2.0 |
| of which Latin America ${ }^{2}$ | 1.9 | 0.7 | 1.5 |
| of which Africa | 3.1 | 2.8 | 3.2 |
| North America ${ }^{2}$ (NA) | 2.8 | 2.1 | 2.5 |
| of which United States | 2.9 | 2.3 | 2.7 |
| Asia-Pacific (APAC) | 4.3 | 3.6 | 3.9 |
| of which China | 5.2 | 4.4 | 4.8 |
[^0]
[^0]: ${ }^{1}$ Real growth of gross domestic product; source: Oxford Economics, "Growth 2023" and "Growth forecast 2024" as of October 2024.
${ }^{2}$ Latin America (excluding Mexico).
${ }^{3}$ North America (Canada, Mexico, United States).
Main Customer Industries
The growth prospects for global economic output, which are slightly better than those presented in the outlook published in the Annual Report 2023, are not reflected in all of Covestro's main customer industries.
Compared to the original outlook, we now anticipate negative growth of $0.5 \%$ for the global automotive industry. The decline is attributable to continued high inventory levels and significantly weaker demand for electric vehicles.
For the year 2024, we still project negative growth of $2.5 \%$ for the global construction industry. The persistent real estate crisis in China and the deteriorating situation in the U.S. construction industry continue to weigh on the sector.
For the electrical, electronics, and household appliances industry, we are anticipating growth of $4.2 \%$, therefore similar to the forecast published in the Annual Report 2023. This is driven by trends such as artificial intelligence and the need of consumers to replace consumer electronics purchased during the coronavirus pandemic.
In fiscal 2024, we now anticipate growth of $0.2 \%$ for the global furniture industry. This is mainly attributable to expected weak production output in Europe and North America due to lower consumer spending on furniture.
Growth in main customer industries ${ }^{1}$
| Growth 2023 | Growth forecast 2024 (Annual Report 2023) | Growth forecast 2024 | |
|---|---|---|---|
| $\%$ | $\%$ | $\%$ | |
| Automotive | 10.4 | 0.8 | $-0.5$ |
| Construction | $-2.1$ | $-2.5$ | $-2.5$ |
| Electrical, electronics and household appliances | $-1.7$ | 1.5 | 4.2 |
| Furniture | $-4.7$ | 0.1 | $-0.2$ |
${ }^{1}$ Covestro's estimate, based on the following sources: GlobalData Plc, B+L, CSIL (Centre for Industrial Studies), Oxford Economics. We limited the economic data of our "automotive and transportation" and "furniture and wood processing" main customer industries to the automotive and furniture segments (excluding the transportation or wood processing segments). As of: October 2024.
Forecast for the Covestro Group
The analysis of the development of our key management indicators is based on the business performance described in this Quarterly Statement, the economic outlook outlined above, and consideration of our potential risks and opportunities.
Compared to the estimates given in the Annual Report 2023 and the Half-Year Financial Report 2024, we expect the challenging economic conditions to continue. For this reason, we have narrowed the guidance for EBITDA and ROCE above WACC for fiscal 2024. We now expect the key performance indicators to develop as follows:
Forecast key management indicators
| 2023 | Forecast 2024 (Annual Report 2023) |
Forecast 2024 (July 30, 2024) |
Forecast 2024 (October 29, 2024) |
|
|---|---|---|---|---|
| EBITDA ${ }^{1}$ | €1,080 million | Between €1,000 million and $€ 1,600$ million | Between $€ 1,000$ million and $€ 1,400$ million | Between $€ 1,000$ million and $€ 1,250$ million |
| Free operating cash flow ${ }^{2}$ | €232 million | Between 0 million and $€ 300$ million | Between $€-100$ million and $€ 100$ million | Between $€-100$ million and $€ 100$ million |
| ROCE above WACC ${ }^{34}$ | $-6.1 \%$ points | Between -7\% points and -2\% points | Between -7\% points and -4\% points | Between -7\% points and -5\% points |
| Greenhouse gas emissions ${ }^{5}$ ( $\mathrm{CO}_{2}$ equivalents) | 4.9 million metric tons | 4.4 million metric tons and 5.0 million metric tons | 4.4 million metric tons and 5.0 million metric tons | 4.4 million metric tons and 5.0 million metric tons |
${ }^{1}$ EBITDA: EBIT plus deprivation, amortization, and impairment losses; less impairment loss reversals on intangible assets and property, plant and equipment.
${ }^{2}$ Free operating cash flow (FOCF): cash flows from operating activities less cash outflows for additions to property, plant, equipment and intangible assets.
${ }^{3}$ ROCE: ratio of EBIT after imputed income taxes to capital employed. Imputed income taxes are calculated by multiplying an imputed tax rate of $25 \%$ by EBIT.
${ }^{4}$ WACC: weighted average cost of capital reflecting the expected return on the company's equity and debt capital. A figure of $8.1 \%$ has been taken into account for the year 2024 (2023; 7.6\%).
${ }^{5}$ GHG emissions (Scope 1 and Scope 2, GHG Protocol) at main production sites (responsible for more than $95 \%$ of our energy usage).
For the Covestro Group's EBITDA, we now forecast a figure between $€ 1,000$ million and $€ 1,250$ million (previously: between $€ 1,000$ million and $€ 1,400$ million). The Performance Materials segment's EBITDA is now projected to total between $€ 400$ million and $€ 600$ million (previouslys: between $€ 400$ million and $€ 700$ million). For the Solutions \& Specialties segment, we now expect EBITDA to be slightly down on the 2023 figure (previously: on a level with the year 2023*).
The Covestro Group's FOCF forecast is unchanged at between $€-100$ million and $€ 100$ million. In the Performance Materials segment, we still expect FOCF to be significantly down on the amount of the year 2023 ( $€ 162$ million). In the Solutions \& Specialties segment, we are also still forecasting FOCF to be significantly lower than in the year 2023 ( $€ 551$ million).
We now anticipate ROCE above WACC to be between -7\% points and -5\% points (previously: between -7\% points and -4\% points).
The Covestro Group's GHG emissions measured as $\mathrm{CO}_{2}$ equivalents are still projected to be between 4.4 million metric tons and 5.0 million metric tons.
Opportunities and Risks
With regard to the Covestro Group's opportunity or risk factors, no material change has been made compared to the presentation of risk categories in the Annual Report 2023. At the time this Quarterly Statement was prepared, there were no risks that could endanger the Group's continued existence.
[^0]
[^0]: * This may entail a variance in the single-digit percentage range from the figure for the year 2023 (€817 million).
Covestro Group Consolidated Income Statement
| $\begin{gathered} \text { 3rd quarter } \ 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 3rd quarter } \ 2024 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine months } \ 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine months } \ 2024 \ € \text { million } \end{gathered}$ | |
|---|---|---|---|---|
| Sales | 3,568 | 3,603 | 11,031 | 10,803 |
| Cost of goods sold | $(3,011)$ | $(3,032)$ | $(9,157)$ | $(8,988)$ |
| Gross profit | 557 | 571 | 1,874 | 1,815 |
| Selling expenses | $(366)$ | $(368)$ | $(1,130)$ | $(1,144)$ |
| Research and development expenses | $(86)$ | $(85)$ | $(284)$ | $(274)$ |
| General administration expenses | $(84)$ | $(77)$ | $(263)$ | $(230)$ |
| Other operating income | 80 | 47 | 228 | 100 |
| Other operating expenses | $(30)$ | $(12)$ | $(149)$ | $(49)$ |
| EBIT $^{1}$ | 71 | 76 | 276 | 218 |
| Equity-method loss | $(5)$ | $(2)$ | $(17)$ | $(2)$ |
| Result from other affiliated companies | 1 | 2 | 1 | 2 |
| Interest income | 19 | 14 | 53 | 43 |
| Interest expense | $(44)$ | $(39)$ | $(127)$ | $(111)$ |
| Other financial result | $(6)$ | 1 | $(10)$ | $(15)$ |
| Financial result | $(35)$ | $(24)$ | $(100)$ | $(83)$ |
| Income before income taxes | 36 | 52 | 176 | 135 |
| Income taxes | $(67)$ | $(21)$ | $(189)$ | $(215)$ |
| Income after income taxes | $(31)$ | 31 | $(13)$ | $(80)$ |
| attributable to noncontrolling interest | - | $(2)$ | $(2)$ | $(6)$ |
| attributable to Covestro AG shareholders (net income) | $(31)$ | 33 | $(11)$ | $(74)$ |
| € | € | € | € | |
| Basic /Diluted earnings per share ${ }^{2}$ | $(0.16)$ | 0.17 | $(0.06)$ | $(0.39)$ |
${ }^{1}$ Earnings before interest and taxes (EBIT) income after income taxes plus financial result and income taxes.
${ }^{2}$ Earnings per share: according to IAS 33 (Earnings per Share), net income divided by the weighted average number of outstanding no-par value voting shares of Covestro AG. The calculation for the third quarter of 2024 was based on 188,740,330 no-par value shares (previous year: 188,740,330 no-par value shares) and on 188,740,330 no-par value shares for the first nine months of 2024 (previous year: 189,438,057 no-par value shares).
Covestro Group Consolidated Statement of Comprehensive Income
| $\begin{gathered} \text { 3rd quarter } \ 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 3rd quarter } \ 2024 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine } \ \text { months } 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine } \ \text { months } 2024 \ € \text { million } \end{gathered}$ | |
|---|---|---|---|---|
| Income after income taxes | (31) | 31 | (10) | (96) |
| Remeasurements of the net defined benefit liability for post-employment benefit plans | 144 | (3) | 179 | 122 |
| Income taxes | (1) | (1) | (1) | (3) |
| Other comprehensive income from remeasurements of the net defined benefit liability for post-employment benefit plans | 143 | (4) | 178 | 119 |
| Changes in fair values of equity instruments | - | (4) | 1 | (4) |
| Income taxes | - | 1 | - | 1 |
| Other comprehensive income from equity instruments | - | (3) | 1 | (3) |
| Other comprehensive income that will not be reclassified subsequently to profit or loss | 143 | (7) | 179 | 116 |
| Losses from derivative financial instruments (cash flow hedge reserve) | - | (2) | - | (2) |
| Income taxes | - | 1 | - | 1 |
| Other comprehensive income from derivative financial instruments | - | (1) | - | (1) |
| Exchange differences of foreign operations | 86 | (29) | (163) | 15 |
| Other comprehensive income from exchange differences | 86 | (29) | (163) | 15 |
| Other comprehensive income that may be reclassified subsequently to profit or loss | 86 | (30) | (163) | 14 |
| Total other comprehensive income | 229 | (11) | 16 | 130 |
| attributable to noncontrolling interest | - | (1) | (3) | (2) |
| attributable to Covestro AG shareholders | 229 | (36) | 19 | 132 |
| Total comprehensive income | 198 | (6) | 3 | 80 |
| attributable to noncontrolling interest | - | (3) | (5) | (8) |
| attributable to Covestro AG shareholders | 198 | (3) | 8 | 58 |
Covestro Group Consolidated Statement of Financial Position
| Sep. 30, 2023 $€$ million |
Sep. 30, 2024 $€$ million |
Dec. 31, 2023 $€$ million |
|
|---|---|---|---|
| Noncurrent assets | |||
| Goodwill | 717 | 707 | 711 |
| Other intangible assets | 537 | 486 | 519 |
| Property, plant and equipment | 5,711 | 5,678 | 5,795 |
| Investments accounted for using the equity method | 180 | 237 | 182 |
| Other financial assets ${ }^{1}$ | 112 | 110 | 109 |
| Other receivables ${ }^{1}$ | 186 | 279 | 114 |
| Deferred taxes | 323 | 275 | 316 |
| 7,766 | 7,772 | 7,746 | |
| Current assets | |||
| Inventories | 2,594 | 2,726 | 2,459 |
| Trade accounts receivable | 2,029 | 1,954 | 1,898 |
| Other financial assets ${ }^{1}$ | 168 | 270 | 311 |
| Other receivables ${ }^{1}$ | 558 | 515 | 496 |
| Claims for income tax refunds | 81 | 87 | 102 |
| Cash and cash equivalents | 1,052 | 539 | 625 |
| 6,482 | 6,091 | 5,891 | |
| Total assets | 13,245 | 13,653 | 13,637 |
| Equity | |||
| Capital stock of Covestro AG | 189 | 189 | 189 |
| Capital reserves of Covestro AG | 3,740 | 3,740 | 3,740 |
| Retained earnings incl. total income | 2,647 | 2,334 | 2,291 |
| Accumulated other comprehensive income | 468 | 386 | 370 |
| Equity attributable to Covestro AG shareholders | 7,044 | 6,649 | 6,590 |
| Equity attributable to noncontrolling interest | 31 | 19 | 28 |
| 7,075 | 6,668 | 6,618 | |
| Noncurrent liabilities | |||
| Provisions for pensions and other post-employment benefits | 340 | 374 | 464 |
| Other provisions | 197 | 186 | 192 |
| Financial liabilities | 2,757 | 2,684 | 2,740 |
| Other financial liabilities ${ }^{1}$ | 17 | 18 | 16 |
| Income tax liabilities | 26 | 43 | 29 |
| Other nonfinancial liabilities ${ }^{1}$ | 22 | 24 | 24 |
| Deferred taxes | 223 | 233 | 256 |
| 3,582 | 3,562 | 3,721 | |
| Current liabilities | |||
| Other provisions | 374 | 329 | 356 |
| Financial liabilities | 932 | 887 | 667 |
| Trade accounts payable | 1,744 | 1,975 | 1,895 |
| Other financial liabilities ${ }^{1}$ | 149 | 146 | 128 |
| Income tax liabilities | 122 | 68 | 48 |
| Other nonfinancial liabilities ${ }^{1}$ | 270 | 228 | 204 |
| 3,591 | 3,633 | 3,298 | |
| Total equity and liabilities | 14,245 | 13,653 | 13,637 |
[^0]
[^0]: ${ }^{1}$ Prior-year figures adjusted. Explanations can be found in the relevant notes in the Annual Report 2023.
Covestro Group Consolidated Statement of Cash Flows
| $\begin{gathered} \text { 3rd quarter } \ 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 3rd quarter } \ 2024 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine months } \ 2023 \ € \text { million } \end{gathered}$ | $\begin{gathered} \text { 1st nine months } \ 2024 \ € \text { million } \end{gathered}$ | |
|---|---|---|---|---|
| Income after income taxes | (31) | 31 | (13) | (80) |
| Income taxes | 67 | 21 | 189 | 215 |
| Financial result | 35 | 24 | 100 | 83 |
| Income taxes paid | (130) | (73) | (247) | (153) |
| Depreciation, amortization and impairment losses and impairment loss reversals | 206 | 211 | 672 | 662 |
| Change in pension provisions | (7) | (8) | (24) | (27) |
| (Gains)/losses on retirements of noncurrent assets | 1 | (6) | (33) | (13) |
| Decrease/(increase) in inventories | 298 | (21) | 179 | (272) |
| Decrease/(increase) in trade accounts receivable | 86 | 77 | (15) | (77) |
| (Decrease)/increase in trade accounts payable | (52) | 29 | (249) | 84 |
| Changes in other working capital, other noncash items | 17 | (23) | 61 | (164) |
| Cash flows from operating activities | 490 | 262 | 620 | 258 |
| Cash outflows for additions to property, plant, equipment and intangible assets | (182) | (150) | (461) | (422) |
| Cash inflows from sales of property, plant, equipment and other assets | - | 7 | 2 | 22 |
| Cash inflows from divestments less divested cash | - | - | 51 | - |
| Cash outflows for noncurrent financial assets | (7) | (18) | (15) | (62) |
| Cash inflows from noncurrent financial assets | - | - | 41 | - |
| Interest and dividends received | 20 | 19 | 54 | 49 |
| Cash inflows from/(Cash outflows for) other current financial assets | 139 | 48 | (160) | 101 |
| Cash flows from investing activities | (30) | (94) | (488) | (312) |
| Acquisition of treasury shares | - | - | (49) | - |
| Dividend payments | - | - | (2) | - |
| Issuances of debt | 25 | 585 | 327 | 994 |
| Retirements of debt | (138) | (747) | (447) | (927) |
| Interest paid | (37) | (30) | (105) | (90) |
| Cash flows from financing activities | (150) | (192) | (276) | (23) |
| Change in cash and cash equivalents due to business activities | 310 | (24) | (144) | (77) |
| Cash and cash equivalents at beginning of period | 741 | 569 | 1,198 | 625 |
| Change in cash and cash equivalents due to exchange rate movements | 1 | (6) | (2) | (9) |
| Cash and cash equivalents at end of period | 1,052 | 539 | 1,052 | 539 |
Employees and Pension Obligations
As of September 30, 2024, Covestro had 17,545 employees worldwide (December 31, 2023: 17,520). In the third quarter of 2024, personnel expenses were down $€ 35$ million on the corresponding prior-year quarter, declining to $€ 491$ million (previous year: $€ 526$ million), largely due to lower expenses for short- and long-term variable compensation.
Employees by division ${ }^{1}$
| Dec. 31, 2023 | Sep. 30, 2024 | |
|---|---|---|
| Production | 11,947 | 12,108 |
| Marketing and distribution | 2,860 | 2,751 |
| Research and development | 1,338 | 1,341 |
| General administration | 1,375 | 1,345 |
| Total | $\mathbf{1 7 , 5 2 0}$ | $\mathbf{1 7 , 5 4 5}$ |
${ }^{1}$ The number of employees on either permanent or temporary contracts is stated in full-time equivalents (FTE). Part-time employees are included on a pro-rated basis in line with their contractual working hours. Employees in vocational training are not included.
Provisions for pensions and other post-employment benefits decreased to €374 million as of September 30, 2024 (December 31, 2023: €464 million). This was mainly due to a reduction in the measurement of obligations as a result of higher discount rates in Germany.
Discount rate for pension obligations
| Dec. 31, 2023 | Sep. 30, 2024 | |
|---|---|---|
| $\%$ | $\%$ | |
| Germany | 3.30 | 3.50 |
| United States | 4.70 | 4.70 |
Exchange Rates
In the reporting period, the following exchange rates were used for the major currencies of relevance to the Covestro Group:
Closing rates for major currencies
| Closing rates | |||||||
|---|---|---|---|---|---|---|---|
| €1/ | Sep. 30, 2023 |
Dec. 31, 2023 |
Sep. 30, 2024 |
€1/ | 1st nine months 2023 |
||
| BRL | Brazil | 5.31 | 5.36 | 6.05 | BRL | Brazil | 5.42 |
| CNY | China | 7.72 | 7.87 | 7.83 | CNY | China | 7.62 |
| HKD | Hong Kong ${ }^{1}$ | 8.30 | 8.63 | 8.69 | HKD | Hong Kong ${ }^{1}$ | 8.49 |
| INR | India | 88.02 | 91.90 | 93.81 | INR | India | 89.19 |
| JPY | Japan | 158.10 | 156.33 | 159.82 | JPY | Japan | 149.19 |
| MXN | Mexico | 18.50 | 18.72 | 21.98 | MXN | Mexico | 19.27 |
| USD | United States | 1.06 | 1.11 | 1.12 | USD | United States | 1.08 |
[^0]
[^0]: ${ }^{1}$ (Special Administration Region, China)
Scope of Consolidation
Changes in the Scope of Consolidation
As of September 30, 2024, the scope of consolidation comprised Covestro AG and 55 (December 31, 2023: 57) consolidated companies.
The decline in the number of consolidated companies in the third quarter of 2024 is due on the one hand to the intragroup merger of the consolidated company Covestro Resins (Germany) GmbH, Meppen (Germany), with Covestro Deutschland AG, Leverkusen (Germany), as of August 1, 2024, and on the other hand to the liquidation of the consolidated company Covestro Coating Resins China Holding B.V., Zwolle (Netherlands), on September 23, 2024.
Acquisitions and Divestitures
No reportable acquisitions or divestitures were made in the third quarter of 2024.
Segment Information
Segment information 3rd quarter
${ }^{1}$ EBITDA and EBIT include the effect on earnings of intersegment sales.
${ }^{2}$ Trade working capital includes inventories plus trade accounts receivable and contract assets, less trade accounts payable, contract liabilities, and refund liabilities as of September 30, 2023/2024.
Segment information first nine months
[^0]
[^0]: ${ }^{1}$ EBITDA and EBIT include the effect on earnings of intersegment sales.
${ }^{2}$ Trade working capital includes inventories plus trade accounts receivable and contract assets, less trade accounts payable, contract liabilities, and refund liabilities as of September 30, 2023/2024.
Financial Calendar
Annual Report 2024 ..... February 26, 2025
Annual General Meeting 2025 ..... April 17, 2025
Quarterly Statement First Quarter 2025 ..... May 6, 2025
Half-Year Financial Report 2025 ..... July 31, 2025
Publishing Information
Published by
Covestro AG
Kaiser-Wilhelm-Allee 60
51373 Leverkusen
Germany
Email: [email protected]
www.covestro.com
Local Court of Cologne
HRB 85281
VAT No. DE815579850
Investor contact
Email: [email protected]
Press contact
Email: [email protected]
Translation
Leinhäuser Language Services GmbH
Unterhaching, Germany
Design and layout
RYZE Digital Holding GmbH
www.ryze-digital.de
