Covestro raises 2021 profit forecast for third time

FAN Editor
FILE PHOTO: FILE PHOTO: The logo of German chemicals maker Covestro is pictured outside its headquarters in Leverkusen
FILE PHOTO: The logo of German chemicals maker Covestro is pictured outside its headquarters in Leverkusen, Germany, July 26, 2019. REUTERS/Wolfgang Rattay

November 8, 2021

By Patricia Weiss and Federico Maccioni

(Reuters) – German chemicals maker Covestro on Monday raised its 2021 profit forecast for the third time and was confident about prospects for next year, while adding it was not clear if a boost from higher prices would continue.

The company, whose products are used to make car seats and phone cases, beat analysts’ forecasts with an 89% jump in third-quarter core earnings as strong demand allowed it to hike prices to offset higher energy and raw material costs.

“Overall, we believe that we can conclude a very successful result next year”, Chief Financial Officer Thomas Toepfer told Reuters, while adding he couldn’t say at this stage whether the lift from higher prices would persist in 2022.

Covestro said it now expected 2021 earnings before interest, tax, deprecation and amortisation (EBITDA) of 3.0-3.2 billion euros ($3.5-3.7 billion) compared with 2.7-3.1 billion euros previously.

“We have increased our earnings forecast once again, which shows that we are on the move with good dynamics and are very confident that we can take this dynamic into the fourth quarter”, Toepfer said.

Covestro also raised its 2021 return on capital employed (ROCE) guidance to 19-21% from 16-20% previously, but cut its core volume growth estimate to 10-12% from 10-15%, citing limited product availability.

Toepfer said the shortage was caused by bottlenecks in purchasing raw materials and other inputs, leading to unplanned production outages – including one at the group’s Brunsbuettel site in Germany.

But he added the company produces many inputs itself.

Third-quarter EBITDA surged to 862 million euros from 456 million a year earlier, beating analysts’ average forecast of 854 million in a company-provided poll.

At 0930 GMT, Covestro shares were down 0.2% at 54.40 euros, having earlier risen as much as 1.8%.

($1 = 0.8655 euros)

(Reporting by Patricia Weiss and Federico Maccioni Additional reporting by Bartosz Dabrowski; Editing by Jane Merriman and Mark Potter)

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