Covestro : Financial Report 2023 Q1

QUARTERLY STATEMENT 2023

First quarter

Q1

Covestro Quarterly Statement as of March 31, 2023
Content
Table of Contents
Covestro Group Key Data	3
Significant Events	4
Results of Operations and Financial Position of the Covestro Group	5
Performance of the Segments	7
Forecast, Opportunities, and Risks	9
Covestro Group Consolidated Income Statement	12
Covestro Group Consolidated Statement of Comprehensive Income	13
Covestro Group Consolidated Statement of Financial Position	14
Covestro Group Consolidated Statement of Cash Flows	15
Employees and Pension Obligations	16
Exchange Rates	16
Scope of Consolidation	17
Significant Events after the End of the Reporting Period	18
Segment Information	19
Financial Calendar	20

Reporting Principles

This Quarterly Statement of Covestro AG, Leverkusen (Germany), was prepared in accordance with Section 53 of the Stock Exchange Rules and Regulations (Börsenordnung) of the Frankfurt Stock Exchange. This Statement is not an interim report within the meaning of IAS 34 (Interim Financial Reporting) or a set of financial statements within the meaning of IAS 1 (Presentation of Financial Statements). This report covers the period from January 1 to March 31, 2023. This Quarterly Statement should be read alongside the Annual Report 2022 and the additional information about the Covestro Group contained therein. The Annual Report 2022 is available on our website at www.covestro.com.

Forward-Looking Statements

This Quarterly Statement may contain forward-looking statements based on current assumptions and forecasts made by the management of Covestro AG, Leverkusen (Germany). Various known and unknown risks, uncertainties, and other factors could lead to material differences between the actual results, financial situation, development, or performance of the Covestro Group and the estimates given here. The various factors include those discussed in Covestro's public reports, which are available at www.covestro.com. Covestro AG assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

Acronyms and Abbreviations

Acronyms and abbreviations used in this Quarterly Statement are explained in this Quarterly Statement or in the Glossary provided in the Annual Report 2022.

Inclusive Language

Diversity, equity, and inclusion are important to Covestro. To ensure better readability, we therefore strive to use gender-neutral language and avoid gender-specific terms in this Report. All terms should be taken to apply equally to all genders.

Rounding and Percentage Deviations

As the indicators in this Quarterly Statement are stated in accordance with commercial rounding principles, totals and percentages may not always be exact.

If a deviation changes from positive to negative or vice versa, or if it is greater than 1,000%, this is shown by a period.

Publication

This Quarterly Statement was published in German and English on April 28, 2023. The German version is binding.

2

Covestro Quarterly Statement as of March 31, 2023

Covestro Group Key Data

Sales

Change in sales

Volume

Price

Currency

Portfolio

EBITDA1

Changes in EBITDA

Volume

Price

Raw material price

Currency

Other2

EBIT3

Financial result

Net income4

Earnings per share5

Cash flows from operating activities6

Cash outflows for additions to property, plant, equipment and intangible assets

Free operating cash flow7

1st quarter 2022

€4,683 million

3.6%

22.9%

5.6%

9.5%

€806 million

5.2%

101.9%

-110.4%

6.9%

4.8%

€589 million

(€28 million)

€416 million

€2.15

€157 million

€140 million

€17 million

1st quarter 2023

€3,743 million

-16.8%

-3.9%

0.6%

0.0%

€286 million

-36.2%

-22.5%

-11.8%

0.0%

6.0%

€39 million

(€29 million)

(€26 million)

(€0.14)

(€19 million)

€120 million

(€139 million)

Change

-20.1%

-64.5%

-93.4%

3.6%

.

.

.

-14.3%

.

1. Earnings before interest, taxes, depreciation and amortization (EBITDA): EBIT plus depreciation, amortization, and impairment losses; less impairment loss reversals on intangible assets and property, plant and equipment.
2. Other changes in EBITDA such as changes in provisions for variable compensation.
3. Earnings before interest and taxes (EBIT): income after income taxes plus financial result and income taxes.
4. Net income: income after income taxes attributable to the shareholders of Covestro AG.
5. Earnings per share: according to IAS 33 (Earnings per Share), net income divided by the weighted average number of outstanding no-par value voting shares
   of Covestro AG. The calculation for the first quarter of 2023 was based on 189,948,365 no-par value shares (previous year: 193,143,311 no-par value shares).
6. Cash flows from operating activities according to IAS 7 (Statement of Cash Flows).
7. Free operating cash flow (FOCF): cash flows from operating activities less cash outflows for additions to property, plant, equipment and intangible assets.

3

Covestro Quarterly Statement as of March 31, 2023

Significant Events

Events outside the Company

Challenging Economic Environment

The situation in the European energy markets largely stabilized in the first quarter of 2023 compared with the volatile full-year 2022, mainly due to a significant decrease in gas prices. This is, however, set against persistently weak demand, driven especially by lower consumer spending. The adverse macroeconomic conditions impacted above all on the volumes sold by Covestro in the EMLA region.

War in Ukraine

The Russian war against Ukraine, which began in February 2022, has had a notable impact on the global economy. Covestro's business situation is, however, not directly affected by the consequences of the war, as Covestro does not operate any sites in the countries affected by the war (Russia, Belarus, and Ukraine). As in the previous year, the sanctions imposed on Russia and Belarus by the international community therefore affected Covestro's business only indirectly.

Events within the Company and Funding Measures

Operations Start at New Chlorine Plant in Tarragona

In Tarragona (Spain), Covestro has successfully commissioned a new large-scale plant for the manufacture of chlorine. It is the world's first industrial-scale production plant using the innovative and energy-efficient oxygen- depolarized cathode technology developed by Covestro and partners. The new plant guarantees efficient, continuous, and independent supplies of chlorine for the diphenylmethane diisocyanate (MDI) production in Tarragona, thus strengthening the European MDI production network. 50 new jobs were created at the site as a result of the investment.

Maezio® Product Line to be Discontinued

As part of its continuous Group-wide activities to optimize the portfolio, Covestro will in future align the Engineering Plastics business entity with its core business. As a result, the Board of Management has resolved that the manufacture of the highly specialized Maezio® products, and therefore the operations at the production site in Markt Bibart (Germany), are to be discontinued. In this context, impairment losses of €30 million were recognized on goodwill, intangible assets, and property, plant and equipment in the first quarter of 2023, and provisions and valuation allowances on inventories of €7 million were recognized through profit or loss.

Chief Financial Officer (CFO) Dr. Thomas Toepfer to Leave Covestro at the End of August 2023

In February 2023, CFO and Labor Director Dr. Thomas Toepfer requested the early termination of his contract, which was due to expire on March 31, 2026, to pursue a new role as CFO at the European aircraft manufacturer Airbus. The Supervisory Board of Covestro AG acceded to this request. Until Dr. Thomas Toepfer leaves the company as of August 31, 2023, he will continue his work as CFO and Labor Director to the full extent. The Supervisory Board immediately initiated the search for a successor and will announce the result in due course.

Issuance of Schuldschein Loans

On October 7, 2022, Covestro for the first time issued Schuldschein loans with a total volume equivalent to €650 million. Linked to an ESG rating, these loans were issued in tranches comprising fixed and variable interest rates with terms of three, five, and seven years. The remaining €100 million of the firm Schuldschein loan commitment was transferred to Covestro in the first quarter of 2023.

4

Covestro Quarterly Statement as of March 31, 2023

Results of Operations and Financial Position of the Covestro Group

Results of Operations

Group sales were down 20.1% in the first quarter of 2023, to €3,743 million (previous year: €4,683 million). The decline in sales was due to lower volumes sold and this had a lowering effect on sales of 16.8%, especially because of weaker demand and availability constraints in the EMLA region. Another factor was the lower selling price level, which had a reducing effect of 3.9% on sales, affecting especially the APAC and NA regions. Exchange rate changes had a positive effect on sales, increasing them by 0.6%.

In the first quarter of 2023, sales decreased by 25.0% to €1,792 million (previous year: €2,388 million) in the

Performance Materials segment and by 15.3% to €1,883 million (previous year: €2,222 million) in the Solutions & Specialties segment. Sales were down in all three regions in the first quarter of 2023. In the EMLA region, sales fell by 20.4% to €1,650 million (previous year: €2,074 million). Sales went down by 12.0% to €982 million (previous year: €1,116 million) in the NA region, and by 25.6% to €1,111 million (previous year: €1,493 million) in the APAC region.

Sales by segment and region

€ million, prior-year figures in brackets

1. EMLA: Europe, Middle East, Latin America (excluding Mexico), Africa region.
2. NA: North America region (Canada, Mexico, United States).
3. APAC: Asia and Pacific region.

The Group's EBITDA declined by 64.5% to €286 million in the first quarter of 2023 (previous year: €806 million), primarily due to a reduction in volumes sold driven by demand and availability factors. A decline in average selling prices for demand-related reasons, combined with a rise in raw material prices, led to lower margins, which in turn contributed to lower earnings. In contrast, a decline in provisions for variable compensation had a beneficial effect on EBITDA, while exchange rate movements did not have any notable effect.

EBITDA decreased by 72.1% to €173 million (previous year: €620 million) in the Performance Materials segment

and by 26.3% to €165 million (previous year: €224 million) in the Solutions & Specialties segment.

The Covestro Group's EBIT was down 93.4% to €39 million in the first quarter of 2023 (previous year: €589 million).

5