Covestro Earnings: EBITDA Down by 8% but In Line With Guidance and Slightly Below Vara Consensus

No-moat Covestro 1COV reported third-quarter EBITDA of EUR 277 million, down 8.3% versus the prior-year period and about 2% below the Vara consensus. This number was within the quarterly guidance range for EBITDA of EUR 240 million to EUR 340 million. The decline was mainly driven by lower prices across both segments, as well as lower volumes on account of weaker demand, especially in the North America and the Europe, Middle East, and Latin America regions. As a result, the outlook for 2023 was narrowed at the lower end of the range, with annual EBITDA expected to be around EUR 1.1 billion. Our forecast remains in line with guidance, so we maintain our EUR 52 fair value estimate. At current levels, the shares look fairly valued.

The performance materials segment displayed a substantial growth in EBITDA, up 60.4% to EUR 85 million in 2023. This was primarily driven by the reduction in raw material and energy prices. However, the EBITDA gain was partially offset by lower prices of negative 20% and lower sales volumes of negative 2.4%. Conversely, the solutions and specialties segment faced challenges, with EBITDA declining by 12% to EUR 246 million. Prices in the segment were down by 8.9%, while volumes were down 3.7%.