Well on track Roadshow Presentation - Covestro Investor Relations
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Well on track Roadshow Presentation covestro.com Q1 2018 │ IR Roadshow Presentation
Global leader in high-tech material solutions
Covestro key investment highlights
Favorable industry environment
1 with long-term, above GDP growth prospects in a diverse range of end markets
Portfolio with broad-based geographical and industry footprint
2 with increasing share of differentiated, resilient business
Leading and defendable global industry positions
3 as innovation and cost leader
Positioned to deliver future volume growth in line with industries
4 through well-invested asset base and smart capex approach
Attractive cash flow growth outlook
5 with use of cash focused on value creation
Q1 2018 │ IR Roadshow Presentation
Covestro at a glance
Inventor and leader in high-tech material solutions
• Leading global polymer producer in polyurethanes Sales split by regions(c)
and its derivatives as well as polycarbonates 2017 Group sales in % China
22%
• Proven track record of process and product innovation,
APAC
customer proximity as well as market-driven solutions 34% EMLA
42%
• State-of-the-art asset base with leading process technology NAFTA
24%
and total production capacity of approx. 5mt(a)
distributed US Germany
20% 12%
across 30 production facilities around the world
Sales split by end-market
• 8 main sites with world-scale production facilities located in
2017 Group sales in % / Core volume growth, CAGR 2015-2017
Germany, Belgium, China, Thailand and the United States
Sports / Leisure, Automotive(d) /
• Backward-integration into chlorine, propylene oxide and Cosmetics, Health,
diverse industries 19%
Transportation
CAGR Vol. +6%
26%
other feedstock, aimed at sourcing critical raw materials CAGR Vol. +8%
internally with no or limited merchant market sales Chemicals
(non-core) 8%
18% Wood / Furniture
CAGR Vol. +4%
• Headquartered in Leverkusen, Germany, with approx.
CAGR Vol. +4%
12% 17%
Electrical /
16,000 employees(b) globally Electronics
CAGR Vol. +7%
Construction
CAGR Vol. +3%
Sales Core Vol. CAGR EBITDA FOCF ROCE
Key financials 2017
€14.1bn 2015-2017: +5.5% €3.4bn €1.8bn 33.4%
Q1 2018 │ IR Roadshow Presentation Notes: (a) Includes total nameplate capacity for PUR and PCS at year-end for 2017; (b) Employees refers to full-time-equivalents, average 2017
(c) Based on Covestro Annual Report 2017; EMLA = Europe, Middle East, Africa, Latin America; NAFTA = USA, Canada, Mexico; APAC = Asia, Pacific
(d) Automotive with core volume CAGR 2015-2017 of +7%
Covestro business units
Three industry-leading, structurally attractive business units
Business Units Polyurethanes (PUR) Polycarbonates (PCS) Coatings, Adhesives, Specialties (CAS)
Global #1 (3,530kt) Global #1 (1,480kt) Global #1:
• MDI: #3 (1,450kt) • EMEA: #2 (540kt) • Aliphatic / Aromatic isocyanate derivatives
Global Position(a)
• TDI: #1 (750kt) • NAFTA: #2 (230kt) • Polyurethane dispersions
• Polyether polyols: #2 (1,330kt) • APAC: #1 (710kt) • Films (TPU #1, PC #2)
Sales 2017(b) €7.4bn or 52% of Covestro €3.7bn or 26% of Covestro €2.3bn or 16% of Covestro
EBITDA Margin 2017(b) 29.5% 22.8% 20.9%
Rigid foam: • Automotive parts • Surface coatings
• Building insulation • IT and electrical equipment, electronics • Adhesives and sealants
• Cold chain • Consumer products (e.g. sports gear) • Elastomers
• Automotive parts • Medical • Specialty films
Flexible foam: • LED lighting and other applications • Thermoplastic Polyurethanes (TPU)
• Furniture
Key Applications • Bedding / mattresses
Q1 2018 │ IR Roadshow Presentation Notes: (a) Based on total nameplate capacity for PCS, MDI, TDI and Polyether polyols at year-end 2017 relative to competitors as per Covestro internal
estimates; for CAS: based on total volume in 2017 relative to competitors as per Covestro estimates
(b) All prior-year figures have been adjusted to reflect the transfer of the specialty elastomers business from the Polyurethanes segment to the
Coatings, Adhesives, Specialties segment as of January 1, 2018
Global industry positions
Covestro is a leader across its entire portfolio
Polyurethanes Polycarbonates Coatings, Adhesives, Specialties
Aliphatic Polyurethane
MDI TDI Polyether polyols PC isocyanate derivatives dispersions
#1 in PUR #1 in PC #1 in CAS
Capacity share in 2017(a)
Others Others
10% Others Others 10%
24% 19%
30% Others 29% 19%
48% 49%
13% Others
58%
20%
Top 5: 90% Top 5: 76% Top 5: 52% Top 5: 81% Top 5: 90% Top 5: 42%
2022e: Top 5 share 2022e: Top 5 share 2022e: Further consoli- 2022e: Top 5 expected 2022e: Industry structure 2022e: Industry structure
expected to remain expected to remain stable dation expected, to account for ~70% expected to remain expected to remain
stable at 90% at 76% especially in China stable stable
• Sizable investment requirement • Economies of scope crucial
requirements
• Intense pressure to advance process technology • Formulation and application know-how necessary
Entry
• Global asset base to enable customer proximity • Close customer relationships and long-term
• Persistent demand for product and process innovation R&D collaborations
• Efficient feedstock integration required • Operation of global platform essential
Q1 2018 │ IR Roadshow Presentation Notes: (a) Based on total nameplate capacity at year-end 2017 relative to competitors
Source: Covestro estimatesA common chemical backbone across all segments
Significant synergies in scale, process technology and chemical know-how
Infrastructure Raw Materials Core Units / Technology Total volumes: ~12,800kt Sales 2017
Phosgene(d) • Core = ~€12.5bn
Toluene DNT TDA (volumes: ~5,000kt)
Dinitrotoluene Diaminotoluene TDI
• Non-core = ~€2bn
TDI
• Premises (volumes: ~7,800kt)
Nitric Acid (HNO3)
• Site development
• Streets Customer industries
• Pipeline bridges e.g. via Hydrogen (H2) • Automotive /
reformer transportation
• Storage tanks Carbon Monoxide (CO)
MDI
• Construction
• Jetties Phosgene(d)
Benzene MNB Aniline MDA • Wood / furniture
• Power supply Mono-Nitrobenzene Methylene Dianiline MDI
• Electrical /
& distribution
electronics
• Waste Cl2 Phosgene(d) Phosgene(d)
• Chemicals
Chlorine(a)
management NaOH DPC LPC(b)
Diphenylcarbonate • Sports, leisure,
• Safety
PCS
Polycarbonates cosmetics, health,
Phenol BPA other industries
Bisphenol A SPC(c)
Acetone
• Common assets, large scale
Purchased raw materials • Chemical know-how • Customer access
• Chemical know-how Synergies Synergies
• Process technology • Global presence
Covestro activities • Process technology
Q1 2018 │ IR Roadshow Presentation Notes: (a) via Deacon or HCl-ODC technology and / or chloralkali electrolysis; (b) Interface process; (c) Melt process (d) produced from CO and Cl2
Chart contains key feedstock onlyFavorable industry environment
Long-term, above GDP industry growth supported by global trends
Global trends Needs Industry demand outlook(a) 2017 – 2022e Covestro solutions
Climate change ('000kt) CAGR
• Building insulation
• Zero emission concepts 16.9
~4% ~20.5 • Insulation along the cold
• Low energy buildings chain
PU(b)
• Foam mattresses and
comfort solutions
Mobility 2017 2022e • Weight-saving car parts
• Energy efficient mobility
• Lightweight transportation CAGR • Lightweight materials for
• Electric vehicles ~5.3 transportation
4.3 ~4%
• Roofing and glazing for
PC
buildings
Growing population
• Blends and composites for
• Food preservation electronics / IT and
2017 2022e
• Low cost durable goods consumer goods
CAGR
~3.9 • High performance surfaces
Increasing urbanization 3.3 3-4% and coatings
CAS(c)
• Affordable housing
• High-tech films
• Living comfort
• Public infrastructure • Solvent-free coatings and
2017 2022e
adhesives
Q1 2018 │ IR Roadshow Presentation Notes: (a) Assumes global GDP CAGR 2017–2022e of ~3%; (b) Comprises MDI, TDI and polyether polyols
(c) Shows PU raw materials industry demand in coatings, adhesives and sealants; additionally TPU, elastomers and films
Source: Covestro estimatesProduct innovation is long-term driver of growth
Addressing ever-changing customer needs for new material solutions
Need Overall market Relevant market Covestro solutions
More durable and eco- Energy consumption Offshore wind energy Novel components for wind power plants: PU resins for rotor
nomical wind power plants CAGR: ~3% CAGR: ~19% blades, PU materials for coatings, Elastomers for sea cables
Energy- and cost-efficient Construction Polyurethane insulation Raw materials for PU foam (rigid and in spray form) enabling
buildings CAGR: ~2% CAGR: ~5% highly efficient insulation
Reduction of high energy Luminaire Luminaire LED
Polycarbonates in LED lenses, light guides, heat sinks
consumption of lighting CAGR: ~3% CAGR: ~12%
Eco-friendly produced Coating industrial furniture Water-based industrial furniture
New bio-based hardener for water-based wood coatings
furniture CAGR: ~3% CAGR: ~5%
Sustainable and functional Textile coating Covestro relevant textile coating Waterborne, solvent-free materials for functionalized textiles
fashion CAGR: ~6% CAGR: ~11% in diverse applications
More and better cooling Refrigerators Refrigeration insulation foam Raw materials for particularly effective insulating foams: 40%
devices CAGR: ~3% CAGR: ~8% smaller pores allow up to 10% better insulation
Perfect insulation for Containers Reefer containers Rigid polyurethane foam components for temperature-
perishable products CAGR: ~4% CAGR: ~9% controlled shipments
Reduced weight and Global car production Car applications Attractive alternatives to conventional materials: polymers to
increased comfort CAGR: ~3% CAGR: ~5% replace glass and metal
Q1 2018 │ IR Roadshow Presentation Sources: Covestro capital markets day 2017 presentation “Innovation”, pages 6-13Portfolio geared towards differentiated products
Over 50% of sales generated with resilient businesses
Sales by segments Highlights
% of 2017 Group sales
• CAS viewed as resilient on both sales and earnings due to
Resilient businesses
characteristics of niche coating / ingredients chemicals
CAS(a) • Polyols viewed as resilient on both sales and earnings as
16% Polyols demonstrated over the last decade
Resilience Resilience • PCS business with increasing share of resilient business through
in PCS in MDI product mix shift to differentiated, high-value industry applications (e.g.
>55% >25% automotive, medical, electronics)
MDI(a)
resilient • In MDI, differentiation potential beyond standardized products in >25%
PCS
resilient of product portfolio
~15% • Transfer of specialty elastomers business from MDI / PUR to CAS
MDI segment lowers resilient part of MDI by ~5pp
• TDI fly-up margins increased share of non-resilient earnings in 2017
PCS
~12%
Others TDI
Q1 2018 │ IR Roadshow Presentation Notes: (a) All prior-year figures have been adjusted to reflect the transfer of the specialty elastomers business from the Polyurethanes segment to the
Coatings, Adhesives, Specialties segment as of January 1, 2018Margin resilience in CAS
Focus on stable high margins in CAS business with defendable competitive advantages
Global leading supplier of high performance materials to the coatings, adhesives and sealants industries
6+ 2,300+ 4,300+ #1 €2.3bn 19.3%
Monomers Products Customers(a) Producer of Sales 2017(c) EBIT margin
aliphatic 2017(c)
isocyanates(b)
CAS products have all the characteristics of niche coating / ingredients chemicals
High value-add materials
Priced on the basis of performance, high level of margin resilience
Competition with other players based on performance, distinct entry requirements
Small proportion of cost to end-customer
Low volumes and large number of niche-customized products sold
Products tailored to customer needs lead to significant switching efforts
Product innovation and R&D critical to success
Q1 2018 │ IR Roadshow Presentation Notes: (a) Includes direct customers only
(b) Based on total aliphatic isocyanates volume in 2017 relative to competitors as per Covestro estimates
(c) All prior-year figures have been adjusted to reflect the transfer of the specialty elastomers business from the Polyurethanes segment to the
Coatings, Adhesives, Specialties segment as of January 1, 2018Margin resilience in polyols
Polyether polyols demonstrate inherently stable margins
Resilience of polyether polyols business confirmed in 2017
% of 2017 Group sales
Polyols
CAS 2005 – 2016 Spreads
from around 800US$/t to 1,000US$/t
MDI
resilient
PCS
resilient
MDI
Global polyols price(a) Global propylene price(a)
PCS
Others TDI
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• Non-integrated polyether polyols producers • Resilient industry margins over the last decade reflective of overall Covestro polyether
with limited competitiveness polyols profitability
• Single capacity addition with little influence • Spreads not materially impacted by high volatility of propylene prices, particularly during
on supply / demand dynamics the financial crisis
• Distinct entry requirements for new players, • Propylene oxide supply / demand dynamics create local pricing opportunities in the
e.g. capex and technology short-term
Q1 2018 │ IR Roadshow Presentation Notes: (a) The global average polyols / propylene prices are calculated based on the polyols / propylene prices in Europe,
US and China and weighting this average against the respective demand in those regionsCompetitive cost position
Leading cash costs across business segments and regions
North America Europe Asia Highlights
Cash cost Cash cost Cash cost
• MDI / TDI are mainly regional
industries due to relatively high
MDI(a)
transportation costs, whereas
PC is a rather global industry
Covestro Baytown North American North American European Covestro Covestro Covestro European Chinese leader Covestro Chinese Asian laggard • In the US, there are only 2-4
follower laggard Shanghai laggard
leader Uerdingen Brunsbüttel Tarragona laggard
producers, whereas APAC is
most fragmented with around a
dozen players for each product
• Covestro is the global low-cost
TDI(a)
producer in TDI / PCS with a
cash cost advantage of ~50% /
~30% compared to the average
Covestro Baytown North American follower Covestro European follower European laggard Covestro Chinese Chinese Asian laggard of the 5 least competitive plants
Dormagen Shanghai follower laggard
• Covestro is one of the low-cost
producers in MDI, which has a
relatively flat cost curve reflected
PCS(b)
by the limited cash cost
advantage of only ~20%
between the average of the best
Covestro Baytown North American North american
follower laggard
Covestro
Uerdingen
European follower European laggard Covestro
Shanghai
Covestro Map Asian follower Asian laggard
Ta Phut
and worst 5 plants
Q1 2018 │ IR Roadshow Presentation Notes: (a) Cost of production based on total raw material costs less co-product credits, variable and fixed conversion costs at 100% utilization, based on
nameplate capacity for FY 2016
(b) Cost ex gate, 82% utilization rate for all plants based on nameplate capacity for FY 2016. Integrated players are shown without any margins
for BPA, phenol, acetone, etc.Historical industry development and outlook
Above GDP growth driving industry capacity utilization and supporting stable margins
Demand development (2011 – 2021e) Supply development (2011 – 2021e) Industry highlights
(kt)(a) CAGR (kt)(b) CAGR
CAGR
CAGR
~4% • Structural improvement of demand for the foreseeable future,
4-5% 4.5% ~8,560 driven by accelerated GDP growth and substitution trend
5.5% ~7,900
7,070
6,350 • Budgeted demand growth of 4-5% could be conservative given
MDI
5,670
4,850
the strong demand trends
• Major additions expected until 2021: BASF, Covestro, SLIC,
Kumho Mitsui, Sadara (Dow/Saudi-Aramco)
2011 2016 2021e 2011 2016 2021e
CAGR CAGR
CAGR • TDI margins currently above long-term average due to delayed
CAGR
2.7% ~7% start-up of major investments
3.2% 3-4% ~3,420 • Margins expected to normalize mid-term based on new world-
TDI
~2,600 2,460
1,860 2,180 2,150 scale capacities
• Major additions expected until 2021: BASF, Sadara (Dow/Saudi-
Aramco), Wanhua
2011 2016 2021e 2011 2016 2021e • Possible industry consolidation in China
CAGR CAGR
CAGR
CAGR
2.6% ~4% ~6,050 • Diversified growth drivers ensure stability of demand
3.0% ~4% ~5,100
4,365
4,960 development
PCS
4,150
3,585
• Major additions expected until 2021: Covestro, Wanhua, Luxi,
Lotte, Heng Yuan, Ningbo Zhetie Dafeng, SABIC-Sinopec
• New industry players likely to penetrate low-end applications
2011 2016 2021e 2011 2016 2021e
Q1 2018 │ IR Roadshow Presentation Notes: (a) Assumes global GDP CAGR 2016–2021e of 2-3%
(b) Based on historical and announced future nameplate capacities
Source: Covestro estimatesSmart capex approach
Expand existing asset base through capital-efficient growth investments
Investments following strict criteria catalogue Highlights
(€m)
149% 178% 165% 84% 88% 99% 97% 91% 111% 74% 61% 100% >100% >100% Until 2008
• Capacity expansion through growth
upper end investments
Maintenance (sustain investments)
889 Growth (and efficiency, restructuring, • Building up an integrated, multi-BU, world-
actual
831
non-production infrastructure investments)
spending
scale site in Caojing, China, as APAC
Capex as % of D&A (2015 adjusted for impairment losses) depends on production hub
753 projects
673
and timing 2009 to 2016
652 600-650
631 • Continue expansion of Caojing site
574 lower end
• Increasing utilization of underutilized assets
512 505 514 518
• Optimize regional production network
419
2017 to 2021e
• Accompany industry growth by adding
capacity through smart capex approach
2022e and beyond
• New growth investments lead to capacity
expansions
• Strengthen leading industry positions
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e
Q1 2018 │ IR Roadshow PresentationFY 2017 – Free Operating Cash Flow
Record FOCF despite higher working capital
Free operating cash flow development 2015-2017 Highlights
in € million
• The FOCF to EBITDA conversion rate
FOCF 964 +42% 1,367 +35% 1,843 decreased from 68% in 2016 to 54% in
2017 due to higher working capital needs
• Working capital to sales ratio almost
165
133 25
unchanged at 15.4% in 2017 vs. 15.6% in
115 3,435 2016, within the target range of 15-17%
2,014 • Capex of €518m up Y/Y inline with smart
1,641
capex approach; capex below D&A of
€627m
-222 -419 -475
-509
-418
-518
-194
-510
-89
2015 2016 2017
Adj. EBITDA Special items Changes in Working Capital Capex Income taxes paid or accrued Other effects
15 Q1 2018 │ IR Roadshow PresentationAccelerated delivery of €5bn cumulative FOCF now until 2019
Use of free cash flow – focus on value creation and cash return to shareholders
Dividend policy Portfolio Return to
shareholders
€
€
• FY 2017 dividend of €2.20 per share, • Disciplined & focused approach • Share buy-back for up to €1.5bn(a) started
63% above prior year • Acquisitions with focus on high margin in Q4 2017, running until mid-2019
• Total payout amount of €436m and differentiated business areas • 4.5 million shares bought back for a total
• Policy: focus on increasing or at least • Ongoing portfolio optimization including amount of €400m during first tranche
stable dividends going forward evaluation of potential disposals • Commitment to return further excess
cash to shareholders
16 Q1 2018 │ IR Roadshow Presentation Notes: (a) either up to €1.5bn or up to 10% of stock capital, whichever is reached firstAttractive cash flow profile
Focus on value creation
Strong cash generation history and future commitment
1 driven by volume growth, operational leverage and profitability enhancement measures
Smart capex approach
2 balances required capacity additions and capital-efficient growth investments
Disciplined M&A strategy with focus on value creation
3 follows clear strategic direction, defined process and strict financial criteria
Return of excess cash to shareholders started in Q4 2017
4 via share buy-back of up to €1.5bn or up to 10% of stock capital
Attractive dividend policy
5 with focus on increasing or at least stable dividends going forward
17 Q1 2018 │ IR Roadshow PresentationFinancial Highlights Q1 2018 covestro.com Q1 2018 │ IR Roadshow Presentation
Q1 2018 Key Highlights
Well on track
Stable core volumes Y/Y
EBITDA increase of 26% Y/Y to €1,063m
EPS increase of 40% Y/Y to €3.24
FOCF increase of 73% Y/Y to €364m
Guidance confirmed for FY 2018
19 Q1 2018 │ IR Roadshow PresentationQ1 2018 – Sales per Region
Core volumes on high previous year’s level
Development in Q1 2018 Highlights
in € million / Core volume growth Y/Y
High basis in Q1 2017
• Sell out of production and inventories to satisfy pent-up demand after Force
China
813
Majeure in Q4 2016
Vol. +3%
• Ramp-up of new production lines in China at PCS
• Pre-buying at CAS ahead of announced price increases
APAC
1,260
EMLA
Vol. +3%
1,679 Stable core volumes in Q1 2018
Vol. -1%
• Constrained availability of supply in all regions
• Solid demand in Automotive, decline in Construction
• EMLA: solid growth in Germany for CAS, double-digit growth in Latin America,
NAFTA
840 driven by Brazil
Vol. -2%
• NAFTA: Positive development in PUR
Germany
471 • APAC: Strong core volume growth in PCS, stable development in PUR and CAS
US Vol. -2%
693
Vol. -1%
Q1 2018 │ IR Roadshow PresentationQ1 2018 – Sales Bridge
Strong pricing mitigated by considerable FX headwind
Sales Bridge Highlights
in € million
+513 -258 Strong pricing and high industry utilization
3,779
3,586 -62 • Higher selling prices positively impacted
FX
Volume Price
sales by 14.3% Y/Y
• Sales volumes declined by 1.7% Y/Y due to
significantly lower non-core volumes
Negative FX impact
• FX effects burdened sales by 7.2% Y/Y
+5.4%
mainly due to weaker USD and CNY
Q1 2017 Q1 2018
21 Q1 2018 │ IR Roadshow PresentationQ1 2018 – EBITDA Bridge
Expanded pricing delta fully compensates considerable FX headwind
EBITDA Bridge Highlights
in € million
Pricing Delta Improving cash margin
+€390m
+513 -123
• Positive pricing delta driven by PUR and
-70 PCS
-84
Raw 1,063
• Selling prices increased significantly more
FX
Material
Other
than raw material prices
Price
846 items
-19
Considerable FX headwind
Volume Price
Other items
• Higher maintenance costs
+25.7% • Increased costs for logistics
• Prior-year benefited from provision release
of €9m for Tarragona
Q1 2017 Q1 2018
22 Q1 2018 │ IR Roadshow PresentationQ1 2018 – Group Results
Continued margin expansion
Net Sales and Core Volume Growth Highlights
in € million / changes Y/Y
8.9% • Stable core volumes (in kt) on high level:
7,000
6,000
2.6% 4.2%
0.0%
10.0%
5.0%
PCS compensates for declines in PUR and
-1.7%
5,000
4,000
0.0% CAS
-5.0%
• Sales increased by 5.4% driven by higher
3,000
-10.0%
2,000
-15.0%
1,000
0
3,586 3,498 3,532 3,522 3,779
-20.0%
prices
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Net Sales Core Volume Growth Y/Y
EBITDA and Margin Highlights
in € million / margin in percent
23.6% 24.2% 24.4% 25.0%
28.1% • EBITDA margin improved significantly to
1,200 30.0%
1,000
25.0%
20.0%
28.1% vs. 23.6% in Q1 2017
15.0%
• Excluding TDI fly-up, margin increased to
800
10.0%
600 5.0%
0.0%
400
-5.0%
-10.0%
c.23% vs. c.20% in Q1 2017
200
846 848 862 879 1,063
• Q1 2018 represents 13th consecutive
-15.0%
0 -20.0%
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
quarter with Y/Y EBITDA increase
EBITDA EBITDA Margin
23 Q1 2018 │ IR Roadshow PresentationQ1 2018 – PUR Segment Results
Polyurethanes – record margins continued
Net Sales and Core Volume Growth Highlights
in € million / changes Y/Y
• Slight decline in core volumes due to
6.3%
4.1% 5.3% constrained product availability
-1.0%
-2.9%
• Sales increased by 7.1% Y/Y driven by price
in all three product groups
1,821 1,818 1,871 1,876 1,950
• Negative FX impact (-7.4% Y/Y)
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Net Sales Core Volume Growth Y/Y
EBITDA and Margin Highlights
in € million / margin in percent
30.2% 29.4% 32.6% 32.7% • EBITDA increased by 36.1% Y/Y with a
25.7%
margin of 32.7% vs. 25.7% in Q1 2017
• Underlying EBITDA margin excluding TDI
fly-up contribution expanded to c.22% vs.
468 549 550 612 637 c.19% in Q1 2017 driven by higher margins
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 in MDI
EBITDA attributable to one-time items & fly-up TDI margins EBITDA EBITDA Margin
Restatement of all 2017 figures to reflect the reclassification of the specialty elastomers business
24 Q1 2018 │ IR Roadshow PresentationQ1 2018 – PCS Segment Results
Polycarbonates – Favorable pricing delta
Net Sales and Core Volume Growth Highlights
in € million / changes Y/Y
• Solid core volume growth of 2.7% Y/Y
14.7%
despite double-digit increase in Q1 2017
1.5% 3.7% 2.7%
0.7%
• Sales increase by 8.3% Y/Y, mainly driven
by higher selling prices (+16.3% Y/Y)
954 911 933 939 1,033
• Negative FX impact (-8.2% Y/Y)
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Net Sales Core Volume Growth Y/Y
EBITDA and Margin Highlights
in € million / margin in percent
29.3% • EBITDA increased by 30.6% due to positive
24.3%
21.6% 22.6% 22.7% pricing delta and volume leverage
• Price increases balanced out negative raw
material impact
232 197 211 213 303
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
EBITDA EBITDA Margin
25 Q1 2018 │ IR Roadshow PresentationQ1 2018 – CAS Segment Results
Coatings, Adhesives, Specialties – Encouraging start to the year
Net Sales and Core Volume Growth Highlights
in € million / changes Y/Y
1,200
10.8%
20.0%
15.0%
• Slight decline in core volumes, although on
high previous year’s level
1,000
10.0%
800
-0.2% -1.0% -1.3% 5.0%
-3.1%
600 0.0%
-5.0%
• Sales decrease by 7.1% Y/Y, driven by
400
-10.0% volume (-2.2% Y/Y) and negative FX impact
200
0
637 604 557 529 592 -15.0%
-20.0%
(-5.9% Y/Y)
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Net Sales Core Volume Growth Y/Y
EBITDA and Margin Highlights
in € million / margin in percent
• EBITDA decreased by 15.0% Y/Y due to
25.1%
20.0% 22.4% 23.0%
higher raw material costs and lower sales
15.1% volumes
• EBITDA margin of 23% on high level
160 121 125 80 136
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
EBITDA EBITDA Margin
Restatement of all 2017 figures to reflect the reclassification of the specialty elastomers business
26 Q1 2018 │ IR Roadshow PresentationQ1 2018 – Free Operating Cash Flow
Strong FOCF despite higher working capital
Free Operating Cash Flow development Highlights
in € million
• FOCF follows EBITDA development: FOCF
FOCF 77 +174% 211 +73% 364 to EBITDA conversion rate increased to
34% vs. 25% in Q1 2017
• Working capital to sales ratio* at 18.7%
driven by usual seasonality, plus higher
1,063
846
valuation of stocks and increased
receivables
508
• Capex of €88m up Y/Y in line with smart
capex approach and full year guidance
-304
-441
-544
-47
-80
-74
-91 -29 -88
-56
-11
Q1 2016 Q1 2017 Q1 2018
EBITDA Changes in Working Capital Capex Income taxes paid Other effects
* Method of calculation: WC on 31.03.2018 divided by sales of last four quarters
27 Q1 2018 │ IR Roadshow PresentationQ1 2018 – Total net debt
Strong balance sheet
Total net debt Highlights
in € million
• Total net debt to EBITDA ratio* unchanged
106 1,480
1,470 at 0.4x
257 3 187
283 • Further decrease of net financial debt by
8
€96m, despite cash outflow for the share
-364 buy-back
• Repayment of a €500m bond out of cash
• Pension provisions increased by €106m due
1,187
1,293 to lower interest rates
• Equity ratio further improved to 50%
Dec. 31, FOCF Interest Share Others Changes in March 31,
2017 buy-back provisions 2018
Net Financial Debt Provisions for Pensions
* Method of calculation: Total net debt on 31.03.2018 divided by EBITDA of last four quarters
28 Q1 2018 │ IR Roadshow PresentationConfirmation of 2018 guidance
Well on track
FY 2017 Guidance FY 2018
Low- to mid-single-digit
Core Volume Growth +3.4%
percentage increase Y/Y
Ø 2015-2017: Significantly above the average
FOCF
€1,391m of the last three years
ROCE 33.4% Approaching previous year’s level
Additional financial expectations FY 2017 Guidance FY 2018
EBITDA FY €3,435m Around previous year’s level
EBITDA Q2 Q2 2017: €848m Above previous year’s level
D&A €627m €600-620m
Financial results €-150m €-100 to -120m
Effective tax rate 24.1% 25-27%
Capex €518m €600-650m
Basic assumptions FY 2018: Exchange rate of EUR/USD ~1.20 and a similar macroeconomic environment as in 2017
29 Q1 2018 │ IR Roadshow PresentationUpcoming IR Events Find more information on investor.covestro.com Reporting dates • July 26, 2018 Half-Year Financial Report 2018 • October 25, 2018 Q3 2018 Interim Statement • February 25, 2019 Annual Report 2018 Capital Markets Day • June 28, 2018 London Broker conferences • May 15, 2018 Deutsche Bank, 9th Annual dbAccess Asia Conference 2018, Singapore • May 24, 2018 Berenberg ,USA Conference 2018, Tarrytown • June 5, 2018 Commerzbank, mBank Chemical Event, Warsaw • June 6-7, 2018 Deutsche Bank, dbAccess, German, Swiss & Austrian Conference, Berlin Annual General Meeting • April 12, 2019 Annual General Meeting, Bonn 30 Q1 2018 │ IR Roadshow Presentation
Disclaimer 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 situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro’s public reports, which are available on the Covestro website at www.covestro.com. The company assumes no liability whatsoever to update these forward-looking statements or to adjust them to future events or developments. 31 Q1 2018 │ IR Roadshow Presentation
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