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Stocksak: Covestro’s profit outlook is cut again on energy and raw materials costs


© Stocksak. In this illustration, May 3, 2022 the Covestro logo can be seen. REUTERS/Dado Ruvic/Illustration

(Stocksak). German chemicals maker Covestro cut Tuesday its 2022 earnings guidance. It reported weaker-than expected quarterly profits. Covestro blamed the European energy crisis and high gas and raw materials prices.

The company, which produces foam chemicals for mattresses, car seats, and insulation for buildings, stated that it was only able offset the sharp rises of raw material prices and energy prices to a limited degree by higher prices.

Covestro now anticipates 2022 earnings (earnings before interest, taxes and depreciation) of between 1.7 billion and 1.8 million euros ($1.7 billion to $1.8 billion). This is a significant increase from the previous forecast of 1.7 billion to 2.2 billion.

It also reduced its FOCF forecast to 0 and 100 millions euros, from a range of 500 to 600 million euros.

Covestro also reported that the third quarter EBITDA fell 65%, to 302 millions euros. This is below the analysts’ average estimate (320 million euros) in a company poll.

The German government announced earlier this month that it would spend close to 100 billion euros to reduce the pressure on consumers and industrial customers from rising gas prices.

Chemical companies are the most severely affected by the energy crises because they use both gas as a raw material for their production and as an source of energy.

“We will have the challenge of dealing with this unprecedented environment.” In a statement, Markus Steilemann, chief executive of Covestro, stated that they are using all the levers at their disposal to guide the company through the current situation.

According to the company, August was the last time that gas could be replaced as a source of raw material. There were limited options for replacing the fuel as an energy source. However the company was still trying to find oil alternatives.

($1 = 1.0121 euros)

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