# Covestro sees lower 2023 profit, cash flow as macro challenges prevail
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-02
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Covestro expects lower core profit and free cash flow in 2023
Meta Description: Covestro foresees decreased core profit and free cash flow in 2023 due to ongoing economic hurdles and rising energy prices. Market may react to weaker
URL: https://financedigest.com/covestro-sees-lower-2023-profit-cash-flow-as-macro-challenges-prevailhtml

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By Bartosz Dabrowski and Andrey Sychev

(Reuters) -German chemicals maker Covestro said on Thursday it expected lower core profit and lower free cash flow in 2023 as economic challenges persist, after a global “polycrisis” caused a sharp rise in energy and raw material prices last year.

Covestro’s shares were down around 4% at 0910 GMT after it said ongoing impairments from the coronavirus pandemic in China, high inflation and an overall slowdown in global economic growth continued to weigh on its earnings.

It forecast annual core earnings (EBITDA) and free cash flow below the 1.62 billion euros ($1.72 billion) and 138 [million euros](https://www.financedigest.com/hellofresh-sees-2023-core-profit-of-460-540-million-euros.html "HelloFresh sees 2023 core profit of 460-540 million euros") it reported for 2022, respectively, confirming preliminary numbers from January.

This much-weaker FY23 FCF guidance will be the key focus of the [market this morning and might result in the stock](https://www.financedigest.com/compelling-tips-to-make-profitable-investments-in-the-stock-market.html "Compelling Tips to Make Profitable Investments in the Stock Market") underperforming today,” JPMorgan analyst Chetan Udeshi wrote in a note. He added the EBITDA [forecast was 20% below a consensus estimate provided by the company](https://www.financedigest.com/generic-oncology-drugs-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Generic Oncology Drugs Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027").

Covestro, whose main products include foam chemicals used in mattresses, car seats and insulation for buildings, expects first-quarter EBITDA of between 100 [million and 150 million euros](https://www.financedigest.com/amazon-grants-1-5-million-euros-to-dutch-seaweed-farm-project.html "Amazon grants 1.5 million euros to Dutch seaweed farm project"), against 806 million a year earlier.

Dramatic swings in forecasts for European gas prices in 2023 have left companies and governments struggling to plan ahead as uncertainties for the outlook persist, ranging from the [pace of China’s economic recovery](https://www.financedigest.com/euro-zone-recovery-gathers-pace-allays-fears-of-recession-pmi.html "Euro zone recovery gathers pace, allays fears of recession-PMI") to the impact of the war in Ukraine.

Covestro’s gas requirements for [raw material](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") production make up 50% of its total gas consumption.

German [inflation rose more than anticipated at 9.3% in February](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures"), data from the federal statistics office showed on Wednesday, pointing to no let-up in stubborn price pressures.

Covestro said it would propose no dividend for 2022. It had distributed 3.40 [euros per share](https://www.financedigest.com/mercedes-benz-to-buy-back-up-to-4-billion-euros-in-shares-by-2025.html "Mercedes-Benz to buy back up to 4 billion euros in shares by 2025") last year, the highest in the group’s history.

($1 = 0.9398 euros)

(Reporting by Bartosz Dabrowski and Andrey Sychev in Gdansk; Editing by Milla Nissi & Simon Cameron-Moore)


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