LEVERKUSEN (dpa-AFX) - Plastics group Covestro suffered significant business losses at the start of the year in a difficult industry environment. However, the operating result slumped much less than experts had expected, even after recent somewhat more confident statements by the DAX-listed group. This was mainly due to cost reductions. "Demand in the first quarter remained at a weak level, however, we have taken the right measures on the cost side," CFO Thomas Toepfer said, according to a statement Thursday evening. Shares were up 2.6 percent on the Tradegate trading platform in the early evening compared with the Xetra close.

With sales down by a fifth to 3.74 billion euros, earnings before interest, taxes, depreciation and amortization in the first quarter slumped by almost two-thirds year-on-year to 286 million euros, Covestro said based on preliminary results.

At the beginning of March, Covestro CEO Markus Steilemann had forecast an operating result of 100 to 150 million euros, but at the end of March the company had already said that things were looking somewhat better in terms of general business development. Analysts had already attributed this primarily to the company's cost-cutting program. While sales fell short of the expert's expectations, operating profit was significantly higher.

The bottom line was a loss of 30 million euros from January to the end of March, compared with a surplus of 416 million euros a year ago. Operating free cash flow - that is, the money that ultimately sticks or flows out of Covestro in day-to-day business - was also negative at 140 million euros.

The entire industry has been suffering from very weak demand, especially since last fall. Due to supply bottlenecks, many customers had previously stocked up heavily. In this situation, consumer sentiment also collapsed, and people became more cautious about purchases in view of high inflation and uncertain economic prospects. This caused demand from chemical companies to slump.

Only in the middle of the week, the chemical group BASF had presented key data for the first quarter, which were not as bad as feared. Analyst Oliver Schwarz of Warburg Research had spoken of a slight improvement in sentiment, but also emphasized that it was still uncertain whether the low had now been overcome or not.

In any case, Covestro is still not confident of issuing an annual forecast for the time being in the uncertain economic environment. Management is expected to provide more details on the outlook on April 28 when it publishes its full quarterly figures.

So far, all that has been said is that operating profit (Ebitda) is likely to fall significantly in the current year, having slumped by almost half to EUR 1.6 billion in 2022 from a particularly high prior-year figure. According to a presentation for analysts in early March, an operating profit of one billion euros would result in 2023 if profit margins like those in January were achieved throughout the year. To what extent this is already wastepaper remains to be seen. Analysts expected operating profit of 1.25 billion euros before the publication of the current key data.

Covestro produces, among other things, plastics for automotive parts and laptop trim, for example, as well as foam precursors for insulation materials, car parts, seats and mattresses. In 2022, the Group felt the impact of weak demand, high energy and gas prices, and the massive Corona restrictions in China.

The Performance Materials division, centered around the bulk business with standard polycarbonates, standard urethane components and basic chemicals, came under particularly heavy pressure last year. By contrast, the Solutions & Specialties division, in which Covestro offers specialty products such as customized urethane components, coatings and engineering plastics, had held up much better, thanks in part to the sustainable coating resins business acquired from the Dutch DSM Group in 2021./mis/he