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Covestro sees China lockdown blow in Q2, higher energy costs
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(Reuters) – German chemicals maker Covestro expects COVID-19 lockdowns in China to significantly affect
(Reuters) – German chemicals maker Covestro expects COVID-19 lockdowns in China to significantly affect business in the second quarter, its finance chief said on Tuesday, while its 2022 energy costs could also exceed earlier estimates.
Chief Financial Officer Thomas Toepfer told Reuters the lockdown in Shanghai, which led the company to cut its full-year earnings outlook on Monday, would have bigger and longer effects on the group than originally thought.
Toepfer said Covestro’s energy costs could more than double this year to between 1.7 billion and 2.0 billion euros ($1.8-$2.1 billion), against its previous 1.5 billion euro estimate. The group’s energy costs already increased by 67% in 2021.
“The logistics problems and the problems of the other suppliers have worsened so much that ultimately sales drop quite sharply,” Toepfer added on the second-quarter performance.
Soaring energy prices in the wake of Russia’s invasion of Ukraine have dealt a painful blow to the chemicals industry, which is among the more energy-intense sectors, while lockdowns in China have thrown global supply chains into disarray.
In 2021, China accounted for around 22% of Covestro’s sales.
Covestro shares fell 6.3% to 38.75 euros at 0815 GMT, their lowest level since August 2020.
($1 = 0.9527 euros)
(Reporting by Bartosz Dabrowski in Gdansk, additional reporting by Linda Pasquini; editing by Milla Nissi)
A lockdown is a restriction imposed by authorities to limit movement and access to certain areas, typically to control the spread of a disease or for security reasons.
Energy costs refer to the expenses incurred for the consumption of energy, such as electricity and gas, which can significantly impact business operations and profitability.
A financial outlook is a projection of a company's future financial performance, including expected revenues, expenses, and profitability, often based on current market conditions.
Corporate bonds are debt securities issued by companies to raise capital, where investors lend money to the issuer in exchange for periodic interest payments and the return of principal at maturity.
Market reaction refers to the response of investors and traders to news or events that affect a company's stock price, often reflected in trading volume and price changes.
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