LEVERKUSEN, Germany—At Covestro A.G.'s virtual 2020 annual meeting, broadcast on July 30, CEO Markus Steilemann had a relatively buoyant message. While acknowledging that 2020 remained "an exceptional year," with uncertain times, the Leverkusen-based company is on a clear course and well-positioned for the rest of the year.
The CEO pointed to the past quarter, in which core sales plunged 22.7 percent in comparison with the prior-year quarter; a result reflected by the $1.2 billion drop in sales to approximately $2.5 billion. Moreover, the effect is being amplified by the intensified pressure on prices.
The good news was that although profit was down to $147 million—compared to last year's $541 million—the decline was far less than the $94 million predicted by the analysts.
Plus, the free operating cash flow has increased to $28 million.
"Our strict liquidity management is working," Steilemann said, and on the basis of that, "we are confirming our guidance for the current fiscal year."
Looking ahead, Steilemann emphasized the company's "clear, far-sighted strategy" based on the three cornerstones of strengthening the company's innovative capacity, optimizing its production network and becoming pioneers in sustainability. The company is exploring new areas, such as quantum computing and strengthening its digital chemistry capabilities.
For a more sustainable restart, Covestro has drawn on a new corporate vision to chart a clear course for the company.
"We are embarking on a long strategic journey here—one that will also be arduous," Steilemann said. "But we are convinced: Its goal is worthwhile."
Over the long term, the company plans to align its entire production, its range of products and solutions as well as all areas to the circular concept.
"We will be fully circular," Steilemann said.
Focus topics are alternative raw materials, innovative recycling, joint solutions and renewable energies.
Calling for a circular and responsible approach to resource use, he said value creation must also become more sustainable.
"We have the blueprint for a truly sustainable world: the concept of the circular economy," he said. "It has to become our new global guiding principle."
Steilemann stressed that the economic environment will remain uncertain in the second half of the year as well. The priorities of the past months have been to ensure the safety of employees, business partners and customers, followed by maintaining production and supply chains and safeguarding the company's strong liquidity position. Covestro is currently benefiting from its efficiency program and from the cost-saving measures approved at the beginning of this year.
In addition, the company has adjusted its investment plans and taken various financing measures in the first half of the year, including a new revolving credit facility, short-term working capital facilities, a loan from the European Investment Bank and the issuance of Eurobonds.
Moreover, to further strengthen Covestro's liquidity position in the current exceptional economic environment, the company decided in spring to propose a dividend of $1.42 per share to the annual meeting instead of the originally planned $2.83 per share.
"Our policy is to pay out an increased or at least a stable dividend to our shareholders. That was also our intention this year," said Chief Financial Officer Thomas Toepfer. "We will, however, deviate from that policy in 2020 due to the enormous impact of the coronavirus pandemic."