Covestro AG · VIE:1COV
Covestro — Q2 2020 Earnings Presentation
23 slides from Covestro's earnings presentation, Jul 23, 2020
Slide 1: Guidance confirmed despite low visibility
Guidance confirmed despite low visibility Financial Highlights Q2 2020 covestro.com July 23, 2020 │ Q2 2020 Earnings Call
Slide 2: Forward-looking statements
Forward-looking statements This presentation may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situati
Slide 3: We will be fully circular
We will be fully circular The new vision of Covestro Alternative raw materials Innovative recycling Renewable energy Joint solutions Biomass, CO2, used Energy-efficient technologies Wind and sun: clean energy Cross-industry collaboration materials and waste can allow more used products must power th
Slide 4: We will be fully circular: examples of initiatives
We will be fully circular Examples of various Covestro initiatives Alternative raw materials Innovative recycling Renewable energy Joint solutions Replacing fossil resources Energy-efficient technologies Wind energy Cross-industry collaboration Example Bio-based car top coat Example Recycled polycar
Slide 5: Financial highlights Q2 2020
Financial highlights Q2 2020 -22.7% €125m €24m Core volume EBITDA FOCF growth €-0.28 FY 20 Guidance EPS confirmed 4 July 23, 2020 │ Q2 2020 Earnings Call
Slide 6: Exceptionally high volatility and low visibility
Exceptionally high volatility and low visibility Covestro core volume development versus prior year Changes Y/Y, 7-day averages Strongest Y/Y decline in April +60% Global Sequential improvement since mid-May +30% Earliest volume impact and recovery China globally 0% High volatility around pr
Slide 7: Managing the crisis: cost savings, solidarity pact, strong liquidity
Managing the crisis: cost savings, solidarity pact, strong liquidity Coronavirus pandemic impact on Covestro Financial impact in Q2 2020 Solidarity pact 2020(b) • Globally, core volumes declined by c. 30% Y/Y in • Temporary salary reduction between 6.7% for non- April/May managerial staff and 15% fo
Slide 8: Lower volumes due to global coronavirus pandemic
Lower volumes due to global coronavirus pandemic Q2 2020 – Regional split Sales and core volume growth(a) Core volume growth Y/Y in € million / changes Y/Y • Globally double-digit declines of all key industries China ̶ Auto/transport c. -50% while China flat 544 ̶ Furniture/wood c.-30% while China u
Slide 9: Significant sales decline mainly driven by volume
Significant sales decline mainly driven by volume Q2 2020 – Sales bridge in € million Highlights -32.9% 3,211 Significant volume decrease • Negative volume impact of coronavirus pandemic led to 22.3% Y/Y sales volume decrease (in €) Negative pricing -712 • Lower selling prices, mainly in PUR and PCS
Slide 10: EBITDA strongly burdened by lower volumes
EBITDA strongly burdened by lower volumes Q2 2020 – EBITDA bridge in € million Highlights -72.8% 459 Negative volume leverage(a) • Relatively high negative volume leverage of 47% due to unfavorable product mix effect Decline in contribution margin Pricing delta -€100m • Negative pricing delta, mainl
Slide 11: Polyurethanes – Polyols pushes segment into loss
Polyurethanes – Polyols pushes segment into loss Segment results – Highlights Q2 2020 Sales and core volume growth Highlights in € million / changes Y/Y -0.2% 5.1% 3.6% • Core volume decline (in kt) of -25.9% Y/Y, driven 0.7% -3.6% by polyols, TDI and MDI -25.9% • Double-digit Y/Y core volume declin
Slide 12: Polycarbonates – double-digit margin maintained
Polycarbonates – double-digit margin maintained Segment results – Highlights Q2 2020 Sales and core volume growth Highlights in € million / changes Y/Y 9.3% • Core volume decline (in kt) of -14.4% Y/Y driven by 4.4% 3.5% all key industries except construction, supported by -6.3% -4.9% new customer w
Slide 13: Coatings, Adhesives, Specialties – high negative volume effect
Coatings, Adhesives, Specialties – high negative volume effect Segment results – Highlights Q2 2020 Sales and core volume growth Highlights in € million / changes Y/Y • Demand affected by coronavirus pandemic and 6.2% continued automotive weakness led to negative -0.1% -4.7% -4.0% -5.2% 0.1 0 core v
Slide 14: Relatively stable FOCF despite significantly lower EBITDA
Relatively stable FOCF despite significantly lower EBITDA Historical FOCF development per half year in € million 728 Highlights 530 • Positive FOCF of €24m in Q2’20 (€-55m in Q2’19) despite massively negative impact of pandemic • EBITDA decline of ~€500m reduced FOCF in HY’20 -100 • Working capital
Slide 15: Solid balance sheet and strong liquidity position
Solid balance sheet and strong liquidity position June 30, 2020 – Total net debt in € million Highlights 59 225 21 3,175 • Total net debt to EBITDA ratio(a) of 2.9x end of Q2 2,954 -84 2020 vs. 1.8x end of 2019 • Equity ratio of 42% end of Q2 2020 vs. 46% end of 1,294 2019 989 • Committed to a solid
Slide 16: Approaching trough levels
Approaching trough levels Historical EBITDA development and FY 2020 guidance in € million, EBITDA bridge assumptions for FY 2020 Core volume growth in % EBITDA reference FY 2019: €1.6bn 3,435 • Pricing delta: minus ~€0.35bn(b) 3,200 • Others: plus ~€0.1bn • FX: neutral EBITDA based on stable volumes
Slide 17: Guidance confirmed despite low visibility: FY 2020 guidance
Guidance confirmed despite low visibility FY 2020 guidance FY 2019 Guidance FY 2020 Core volume growth +2.0% Below previous year FOCF €473m €-200 to +300m ROCE 8.4% -1% to +4% Additional financial expectations FY 2019 Guidance FY 2020 EBITDA FY €1,604m €700 – 1,200m D&A €752m ~€770m Financial result
Slide 18: Guidance confirmed despite low visibility
Guidance confirmed despite low visibility Highlights Q2 2020 Global coronavirus pandemic drove down core volumes with strongest volume impact in April and sequential improvement since mid-May Q2 EBITDA was above market expectations due to better than expected cost management Broad-based set of measu
Slide 19: Appendix
Appendix covestro.com July 23, 2020│ Q2 2020 Earnings Call 18
Slide 20: Upcoming IR events
Upcoming IR events Find more information on covestro.com/en/investors Reporting dates • October 27, 2020 Q3 2020 Interim Statement • February 23, 2021 2020 Annual Report Annual General Meeting • July 30, 2020 Annual General Meeting (virtual) Broker Conferences • August 5, 2020 Jefferies Industrials
Slide 21: Lower volumes due to global coronavirus pandemic: HY 2020
Lower volumes due to global coronavirus pandemic HY 2020 – Regional split Sales and core volume growth(a) Core volume growth Y/Y in € million / changes Y/Y • Globally, volume declines in all key industries China ̶ Automotive/transportation c. -30% 932 ̶ Furniture/wood c.-15% Vol. -11.3% EMLA 2,174 ̶
Slide 22: Significant sales decline driven by volume and price
Significant sales decline driven by volume and price HY 2020 – Sales bridge in € million Highlights -22.7% 6,386 Significant volume decrease • Demand shock due to coronavirus pandemic led to 12.5% Y/Y sales volume decrease (in €) -801 +23 Negative pricing 4,939 -580 -89 • Lower selling prices, mainl
Slide 23: EBITDA burdened by lower volumes and negative pricing delta
EBITDA burdened by lower volumes and negative pricing delta HY 2020 – EBITDA bridge in € million Highlights -57.9% 901 Negative volume leverage(a) • Relatively high negative volume leverage of 48% due to unfavorable product mix effect Pricing delta Decline in contribution margin -€250m • Negative pr