Covestro has cut its full-year earnings forecast, citing low water levels on the Rhine River in Germany, “stronger-than-expected competition” in the company’s markets, and increased costs. Covestro now expects 2018 EBITDA to be slightly below the €3.44 billion ($3.92 billion) achieved in 2017. The company had previously anticipated an increase in 2018 EBITDA.
The low water level of the Rhine “has resulted in production losses and higher logistics costs, and therefore lower earnings,” Covestro says. The company has not said in which markets competition is at its most intense. Covestro’s products include methylene di-para-phenylene isocyanate, toluene diisocyanate, polycarbonate, and polyols. The company’s competitors include BASF, DowDuPont including Sadara Chemical, Huntsman, and Wanhua Chemical.
Covestro has also cut its outlook for 2018 core volume growth to a low-single-digit percentage increase, from a low- to mid-single-digit percentage increase. The company expects “slight core volume growth” in the fourth quarter “despite the burden from the low water levels of the Rhine River.”
Covestro has also cut its 2018 free operating cash flow forecast to slightly below last year’s €1.84 billion from a previous forecast of more than €2 billion, and reduced its return on capital employed (ROCE) expectation to slightly below the 33.4% recorded in 2017, having previously projected an ROCE about the same as last year’s level.