Covestro swings to a net loss as COVID-19 drives down demand

MOSCOW (MRC) -- Covestro swung to a net loss of EUR52.0 million (USD60.3 million) in the second quarter from a net profit of EUR189 million in the corresponding period of last year on sales down 32.9% to about EUR2.2 billion, according to Chemweek.

The company confirms that EBITDA plunged 72.8% year on year (YOY) to EUR125 million, which it had communicated in preliminary results released earlier this month. The figures were “significantly impacted by the further spread” of the COVID-19 pandemic in Europe and North America, which caused core volumes to decrease 22.7% YOY on a “massive drop in demand in all key customer industries.”

The strongest impact from COVID-19 on volumes was in April and there has been sequential improvement since mid-May, the company says. Sales in EMEA and North America declined more sharply than in APAC, mainly due to the time lag in the impact of the pandemic, Covestro says.

Despite the slump, EBITDA was ahead of the company’s earlier expectations due to “an accelerated recovery in demand,” especially in the polycarbonates segment, in June, Covestro says. Free operating cash flow swung to a positive €24 million from a negative EUR55 million a year earlier as a result of strict liquidity management, the company says.

“As anticipated, the global coronavirus pandemic had a significant impact on our results in the second quarter,” says Markus Steilemann, CEO of Covestro. “We took the right measures in timely fashion to protect our employees, maintain production and supply chains, and ensure continuous supply to our customers. We have managed to accomplish that very successfully to date and will continue to steer Covestro resolutely through this crisis.”

The company has confirmed its full-year guidance, which it had revised in April. However, the uncertainties associated with the COVID-19 pandemic and its impact on economic development remain high, the company notes.

All Covestro’s businesses were hurt by COVID-19 in the second quarter. The polyurethanes segment saw core volumes drop 25.9% YOY and the trend affected all key customer industries, the company says. Sales were down 38.7% to EUR913 million, mainly due to the lower volumes sold and lower average selling prices. EBITDA for the business swung to a negative EUR24 million from a positive EUR172 million a year earlier as margins weakened, Covestro says.

Second-quarter core volumes in the polycarbonates segment fell 14.4% YOY. The decreased volumes, a result of significant drops in demand from the automotive and transport industries, were cushioned by less of a decline in volumes from the electrical, electronics, and household appliances industries and volume growth in the construction industry. Sales decreased 27.8% YOY to €648 million as selling prices declined and EBITDA plunged 37.7% to EUR96 million.

Core volumes in the coatings, adhesives, and specialties segment were down 25.3% YOY. The pandemic resulted in far weaker demand from key customer industries, a trend that was reflected in particular by a downturn in volumes in the automotive and transport industries. Sales of the business fell 28.7% to €443 million, mainly due to the decline in volumes and lower selling prices. EBITDA dropped 60.0% to EUR60 million as margins softened.

Covestro’s management and supervisory boards, as well as its workforce, are making a joint solidarity contribution to enhance the company’s resilience in the current environment. For Covestro’s German businesses, the management board and employee representatives have agreed on a model to reduce working hours and remuneration for all employees by the end of November 2020. All Covestro’s group companies outside Germany are implementing comparable country-specific, cost-saving measures.

As MRC informed earlier, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, Russia's estimated PC consumption (excluding imports and exports to/from Belarus) rose in January-May 2020 by 19% year on year to 38,900 tonnes (32,700 tonnes a year earlier).

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2018 sales of EUR 14.6 billion, Covestro has 30 production sites worldwide and employs approximately 16,800 people (calculated as full-time equivalents) at the end of 2018.
MRC

MOSCOW (MRC) -- Zagros Petrochemicals is in plans to bring on-stream its No. 2 methanol plant following an unplanned outage, as per Apic-online.

A Polymerupdate source in Iran informed that, the company is likely to resume operations at the plant by this weekend. The plant was shut on July 13, 2020 owing to technical issues.

Located in Assaluyeh, Iran, the No. 2 plant has a production capacity of 1.65 million mt/year.

As MRC reported earlier, in late April, 2020, the first phase of Connell Chemical Industry Ltd.'s 600 KTA MTO complex, a 300 KTA MTO plant, successfully started up and produced on-spec ethylene and propylene. This project is the first large-size chemical project brought online during period when Chinais in the process of restarting the economy while fighting COVID-19 pandemic. The MTO plant started feed-in at 8:18 AM on April 15, produced on-spec propylene at 7:00 AM on April 18, and produced on-spec ethylene at 4:00 AM on April 20.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- The Turkish Competition Council has given permission to SOCAR and BP to establish a joint venture that will operate in the petrochemical sector, local media reported on July 22, said Azernews.

Earlier it was reported that SOCAR and BP applied to the relevant institutions in Turkey to establish a joint petrochemical company, which will be called Mercury complex, in April 2020. Recall that on December 20, 2018 SOCAR and BP signed contractual principles for evaluation of plans for creation a world-class petrochemical complex in Turkey and establishment of a joint venture to manage it.

The construction of the new petrochemical complex is expected to enable Turkey to cover the current account deficit by USD6 billion annually. Moreover, the project will increase the share of SOCAR in petrochemical market of Turkey to 35-40%.

Construction of the complex was planned to begin during the current year in order to put the enterprise into operation in 2023-2025. However, due to low oil prices and to the COVID-19 pandemic, the project implementation has been postponed until 2021.

The Mercury complex will be built near the Petkim petrochemical complex and the STAR refinery in Aliaga region. The enterprise will produce 1.25 million tons of purified terephthalic acid (PTA), 840 thousand tons of paraxylene (PX), 340 thousand tons of benzene.

PTA is the main raw material in the production of polyester from which beverage and food containers, packaging materials, photo and film and other consumer and industrial goods are derived.

According to ICIS-MRC Price report, in Russia, July formulae prices for contract customers were in the range of Rb65,000-67,500/tonne CPT Moscow, including VAT. Prices of material in the spot market remained steady last week, Russian producers continued to ship material from 20 tonnes at a price of Rb70,000-72,000/tonne CPT Moscow, including VAT.
MRC

1. AkzoNobel profits, sales fall on sharply lower demand

MOSCOW (MRC) -- AkzoNobel says that its net profit in the second quarter of 2020 dropped 44% year on year (YOY), to EUR129 million (USD149 million), said Chemweek. Sales went down 19%, to €1.98 billion from EUR2.45 billion in the same period of the previous year. The fall in sales, which dragged profits down, is mainly due to the impact of COVID-19 on end-market demand that resulted in 18% lower volumes YOY, the company says. EBITDA fell 25% YOY, to EUR297 million, the company says. Margin-management and cost-saving programs were able partly to offset the negative effect of lower demand, the company says. AkzoNobel announced preliminary results last week.



MRC

MOSCOW (MRC) -- Versalis, Eni's chemical company, has launched a new line to produce liquid hand disinfectant marketed under the brand name Invix at its plant in Crescentino (Vercelli, Piedmont), to meet the growing demand as a result of the current health situation across the nation, said the company.

The disinfectant, which has been developed based on the formulation provided by the World Health Organization and authorized by the Italian Ministry of Health, is a medical device, the active substance of which is ethanol obtained from vegetable raw materials. The bio-ethanol is produced at the Crescentino plant, designed to process residual biomasses, which has been adapted to temporarily use corn glucose syrup as a raw material to cope with the health emergency.

The product acts as an effective disinfectant, thanks to the alcohol and hydrogen peroxide content, and as an emollient, because of its glycerine content.

The new range of Invix disinfectants will soon be expanded to include gel and surface sanitizing products.

As part of Eni's initiatives supporting communities to handle the current health situation, and thanks to the collaboration of the Italian National Customs Agency and its Vercelli department, several dozens of tonnes have already been delivered to the Piedmont Regional Environmental Protection Agency [ARPA] and the Civil Defence service of the Piedmont Region.

As MRC informed earlier, Versalis plans to increase its 30 ktpa acrylonitrile butadiene styrene (ABS) production at Mantova, Italy in the first quarter of 2021. It was decided to postpone the expansion and maintenance schedule at the plant until the first quarter of 2021 due to market conditions and the impact of the coronavirus pandemic.

According to MRC ScanPlast, ABS production in Russia in May amounted to 780 tonnes. For the period January - May this year, the volume of production of Russian ABS plastics amounted to 4,240 tonnes, down 17% compared to last year.

Versalis is a petrochemical company, a 100% subsidiary of the Italian oil and gas company Eni SpA. The company produces a wide range of petrochemical products and is also one of the world's leading elastomer companies.

Eni S.p.A. (Ente Nazionale Idrocarburi) is an Italian oil and gas company headquartered in Rome. Eni operates in 70 countries around the world.
MRC