Covestro AG Earnings Report

Shares of Covestro AG (ETR:1COV) saw an increase on Tuesday following its Q3 2024 earnings, aligning closely with analyst expectations. Key highlights include:

• EBITDA: €287 million, a 4% year-over-year increase, close to the Visible Alpha consensus of €289 million.
• Revenues: €3,603 million, a 1% rise year-over-year but falling 3% short of the consensus estimate of €3,695 million.
  • This shortfall reflects a 4% decrease in prices and a 1% negative FX impact, partially offset by a 6% increase in sales volumes.
• Price-to-Raw-Material Margin: There was a significant squeeze, posting a negative delta of €126 million, down from a positive €69 million in 3Q23 due to a €150 million drop in prices.
• Net Financial Debt: At quarter’s end, it stood at €2,788 million, including a €256 million pension deficit, resulting in a leverage ratio of 2.7x last twelve months’ EBITDA.
• Free Cash Flow: Came in at €112 million, decreasing from €308 million in the same period last year due to modest working capital inflow and lower capital expenditures.

Segment Performance

• Performance Materials: EBITDA was €125 million, a 47% improvement year-over-year, but still 14% shy of the consensus of €146 million.
• Solutions & Specialties: EBITDA was €208 million, a 15% year-over-year decline but 6% ahead of consensus estimates.

Market Trends

The company observed varied impacts on end markets:
– Automotive volumes showed a low single-digit decline.
– Construction volumes exhibited low teen growth.
– Furniture/wood volumes increased by mid-single digits.

Guidance Updates

• Full-Year 2024 EBITDA Forecast: Adjusted to €1.0 billion – €1.25 billion, slightly below consensus of €1.154 billion.

• Q4 2024 EBITDA Guidance: Revised to a range of €120 million to €370 million, with a midpoint of €245 million, also below consensus of €263 million.

• Free Cash Flow Guidance: Remains unchanged, estimated between -€100 million and +€100 million, while consensus is at €59 million.

Analysts expect minimal share price fluctuations, focusing instead on the ADNOC takeover.

Covestro’s fair value assessment, combining DCF with earnings multiples, is €41 per share; factoring potential ADNOC offers, it raises to €52 per share.