Covestro Faces Challenging Second Quarter Amid Economic Headwinds and Trade Disruptions
Covestro concluded the second quarter of 2025 under significant economic pressure, further intensified by the emergence of new trade barriers. Unpredictable increases in U.S. import tariffs caused notable disruptions across global supply chains, particularly impacting key customer industries and sharply reducing exports to the U.S. This shift led to an oversupply in several relevant sales markets—especially in the Asia-Pacific region—and triggered a steep global decline in prices.
Although sales volumes remained largely stable, the fall in average selling prices, combined with negative currency effects, weighed heavily on financial performance. As a result, Group sales declined by 8.4% year-over-year to €3.4 billion (Q2 2024: €3.7 billion). EBITDA decreased by 15.6% to €270 million (Q2 2024: €320 million), landing at the upper end of the company’s forecast range. This was supported by the reversal of €44 million in bonus provisions following a revision of the full-year outlook. Net income came in at –€59 million, an improvement over the –€72 million recorded in the previous year. Free operating cash flow stood at –€228 million, down from –€147 million in Q2 2024.
“The economic environment remains difficult,” said Dr. Markus Steilemann, CEO of Covestro. “Geopolitical tensions and rising trade barriers unexpectedly intensified pressures in the second quarter. We’re now seeing the consequences: global overcapacity, worsening price dynamics, and a lack of economic momentum. It’s more important than ever to stay focused on what we can control and keep pushing our strategy forward.”
Full-Year 2025 Outlook Revised
Given the persistent global economic weakness and absence of short-term recovery signals, Covestro revised its full-year 2025 forecast on July 11. The company now anticipates EBITDA in the range of €700 million to €1.1 billion, down from the previous forecast of €1.0 billion to €1.4 billion. Free operating cash flow is now projected to range from –€400 million to +€100 million (previously €0 to €300 million). Return on capital employed (ROCE) above the weighted average cost of capital (WACC) is expected to range from –9 to –5 percentage points (previously –6 to –3 points). Covestro’s climate target remains unchanged, with forecast greenhouse gas emissions (CO₂ equivalents) between 4.2 and 4.8 million metric tons.
For Q3 2025, Covestro expects EBITDA between €150 million and €250 million.
“In Q2, weak demand, oversupply, and new tariffs clearly impacted our margins,” said CFO Christian Baier. “Despite stable volumes, these external pressures are evident in our financials. Since a short-term rebound appears unlikely, we have adjusted our guidance and continue to drive forward with our transformation and efficiency programs.”
Strategic Acquisition Bolsters Specialty Films Portfolio
In June 2025, Covestro agreed to acquire Pontacol AG, a Swiss manufacturer of multilayer adhesive films. The deal strengthens Covestro’s position in the specialty films market and supports its “Sustainable Future” strategy. Pontacol brings two specialized production sites in Switzerland and Germany and approximately 100 employees. The acquisition enhances Covestro’s product and customer portfolio, unlocks synergies in central functions, and offers complementary technological capabilities. Funded through existing cash reserves, the transaction supports Covestro’s commitment to maintaining a solid investment-grade credit rating. Completion is expected in Q3 2025.
Executive Leadership Update
Effective August 1, 2025, Monique Buch will assume the role of Chief Commercial Officer (CCO), overseeing the Solutions & Specialties segment and leading six business units including regional Supply Chain Centers. She succeeds Sucheta Govil, whose second term ends on July 31. Buch joined the Executive Board in June 2025.
Segment Performance Overview
Performance Materials
Sales in this segment dropped 11.8% year-over-year to €1.6 billion (Q2 2024: €1.8 billion). EBITDA declined to €149 million (Q2 2024: €196 million), primarily due to margin pressure and costs related to the STRONG transformation program. Free operating cash flow was –€172 million, compared to –€89 million in the prior year.
Solutions & Specialties
This segment saw a 5.4% decline in sales, totaling €1.7 billion (Q2 2024: €1.8 billion). EBITDA was stable at €175 million (Q2 2024: €174 million), supported by lower transformation costs and higher volumes. Free operating cash flow improved to €56 million, up from €36 million the previous year.
First Half Marked by Price Pressure
For the first six months of 2025, Covestro’s Group sales fell 4.8% to €6.9 billion (H1 2024: €7.2 billion), largely driven by lower prices (–3.0%). Group EBITDA declined to €407 million (H1 2024: €593 million). Free operating cash flow totaled –€481 million, compared to –€276 million in the first half of 2024.
