Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Covestro AG (CVVTF, Financial) reported a strong volume growth of 6.1% year on year, driven by improved demand and reliability.
- The company achieved an EBITDA of EUR287 million, which is within their guidance range of EUR250 million to EUR350 million.
- Covestro AG (CVVTF) turned its free operating cash flow positive with EUR112 million in Q3 2024.
- Significant progress was made towards climate neutrality, including a new catalyst installation in China reducing CO2 emissions by 60,000 tons annually.
- The company increased its share of renewable electricity through a PPA with bp, raising its renewable electricity share in Spain from 10% to 30%.
Negative Points
- Sales were affected by lower prices, resulting in a total of EUR3.6 billion, despite volume growth.
- The pricing delta negatively impacted EBITDA by EUR126 million due to an unfavorable supply-demand ratio.
- The automotive and construction industries showed concerning trends, with automotive expected to remain flattish and construction projected to decline.
- Covestro AG (CVVTF) experienced a negative free operating cash flow of minus EUR164 million for the first nine months of 2024.
- The company's net debt increased by EUR159 million compared to the end of 2023, partly due to seasonally negative cash flow and bonus payouts.
Q & A Highlights
Q: Can you discuss demand trends post-Q3, particularly in electronics and any industry showing demand revival?
A: October is developing as expected, similar to September. Electronics showed some improvement earlier but weakened in September. Current trends align with full-year guidance, with strong production reliability allowing us to meet demand opportunities.
Q: Why are you bearish on the automotive sector, and what are your expectations for 2025?
A: Despite positive EV market growth, overall automotive sentiment is cautious, especially in Europe and North America. We remain diversified across OEMs, but expect a weaker Q1 2025. We are vigilant about developments in 2025 but not overly concerned due to our customer base.
Q: Can you provide insights into 2025 budgeting and market growth expectations? Also, any updates on ADNOC offer acceptances?
A: For 2025, we anticipate positive volume growth and stable costs, but it's too early for margin predictions. The ADNOC offer acceptance period is ongoing, and we expect positive shareholder response by the end of the acceptance period.
Q: With Dow reviewing its polyurethanes assets, is Covestro considering consolidation in the European market?
A: We are open-minded about industry movements and will closely watch Dow's strategic review of their European assets. We are prepared to consider opportunities that may arise from this situation.
Q: Are you expecting continued weakness in construction and auto sectors next year?
A: We anticipate ongoing challenges in construction and auto, similar to past cycles in furniture and electro. Construction may improve from Q2 2025, but we remain cautious and prepared for prolonged weakness.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
