Covestro Q1 earnings increased

Covestro’s first-quarter (Q1) earnings and sales rose healthily year on year but the German chemicals major has reduced its full-year outlook on the back of lower global GDP growth expected and China’s stringent lockdown measures, said the company.

Covestro said late on Monday, following stock markets’ closure in Europe, that it was lowering its EBITDA outlook for 2022 by EUR500m. “This is a consequence of the ongoing COVID 19-lockdown in China, particularly around the Shanghai region, further significantly increasing energy and raw material costs and an assumed lower-than-expected global economic growth,” said Covestro.

For the second quarter, for example, the producer said it expected EBITDA to come in between EUR430-530m, a sharp slowdown from Q1’s EUR806m. Expectations for free operating cash flow (FOCF) were also sharply reduced.

Chemical equity analysts at Germany’s Baader Bank said on Tuesday Covestro’s share price was likely to take a hit this week but “part of the reduced guidance might be already” included in the share price, which has underperformed peers as of late. Covestro's stock opened trading on Tuesday down nearly 6%, compared with Monday's close, at EUR39.00/share.

“Reduced 2022 guidance [for EBITDA and FOCF] comes as a negative surprise and indicates 17% on 2022 EBITDA and 40% on 2022 FOCF downward revision needed if the midpoint of the guidance is taken,” said the Baader analysts. “According to Covestro, the Chinese lockdowns have at the beginning not impacted local production and ‘only’ the logistics but, while the storage capacities of Covestro are filled, there is not just a delaying effect of the delivery as a result, but also a reduced production in China as a consequence."

As per MRC, Covestro is expanding its production capacities for thermoplastic polyurethane (TPU) Films in the Platilon range, as well as the associated infrastructure and logistics and schedules to complete the new facilities as early as the end of 2023.

We remind that Covestro closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, Russia's overall consumption of PC granules (excluding exports from Belarus) totalled 7,800 tonnes in January 2022, down by 4% year on year (8,100 tonnes a year earlier).

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2021 sales of EUR 15.9 billion, Covestro has 50 production sites worldwide and employs approximately 17,900 people (calculated as full-time equivalents).
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Oil prices fell on Monday as concerns over weak economic growth in China, the world's top oil importer, overshadowed fears supply might be crimped by a potential European Union ban on Russian crude, said Reuters.

Brent crude futures were down USD3.73, or 3.4%, to $103.41 a barrel at 1403 GMT, while U.S. WTI crude futures fell USD3.98, or 3.8%, to USD100.71 a barrel. Markets in Japan, Britain, India and across Southeast Asia were closed for public holidays on Monday. China released data showing factory activity in the world's second-largest economy contracted for a second month to its lowest since February 2020 because of COVID lockdowns.

"A slowing to that extent, when China is already suffering from a property bust and worries about its (until recently) increased regulation, is potentially a major issue for commodity markets and the world economy," said Tobin Gorey, a Commonwealth Bank commodities analyst, in a note. On the supply side, Libya's National Oil Corp (NOC) said on Sunday it would temporarily resume operations at the Zueitina oil terminal after it declared force majeure in late April on some shipments as political protesters forced a number of oil facilities to suspend operations.

Limiting the downside for prices was the EU leaning towards banning Russian oil imports by the end of the year, according to two EU diplomats, after talks between the European Commission and EU member states over the weekend. The European Commission may spare Hungary and Slovakia from the embargo due to their strong dependency on Russian oil, two EU officials said on Monday, as the Commission is set to finalize its next batch of sanctions on Russia on Tuesday.

Around half of Russia's 4.7 MMbpd of crude exports go to the EU, supplying about a quarter of the EU's oil imports in 2020. While Western countries have refrained from buying Russian oil due to sanctions on those exports, the impact on global supply has been somewhat cushioned as India has been picking up heavily-discounted Russian cargoes.

Still, "Russia’s ability to redirect all unwanted cargoes from the West to Asia is limited", consultancy Rystad Energy said. "In the case of embargoes, Russia will be forced to cut production further as it lacks storage capacity for extra crude volumes."

We remind, US oil refiners expect strong first-quarter earnings as margins to sell gasoline and diesel strengthened due to a steep dropoff in refining capacity and crude oil supplies tightened because of Russia's war with Ukraine.
Refining capacity worldwide has dropped during the coronavirus pandemic, with several less profitable oil refineries closing in the last two years. However, worldwide fuel demand has rebounded to near pre-pandemic levels, boosting profits for facilities that are still operating.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,487,450 tonnes in 2021, up by 13% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market totalled 1,494.280 tonnes, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas, shipments of PP random copolymers decreased significantly.
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US-based epoxy and chlor-alkali producer Olin reported on Thursday a rise in first-quarter net income because sales rose faster than costs, said the company.

The following table shows the company's financial performance. Figures are in millions of dollars.

Olin expects its operations in Freeport, Texas, will continue to contend with reduced power generation at least into the fourth quarter.

For 2022, Olin expects to report USD2.6bn-2.9bn in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

As per MRC, Olin Corporation, a leading vertically integrated chlor alkali producer and marketer, and Plug Power Inc., a leading provider of turnkey hydrogen solutions for the global green hydrogen economy, have announced the signing of a memorandum of understanding (MOU) with the intention to create a joint venture (JV) to produce and market green hydrogen to support growing fuel cell demand in the global hydrogen economy.

We remind that a fire and chlorine spill at Olin Corp’s plant in Plaquemine, a tenant at the Dow Chemical facility, was reported to Iberville Sheriff’s office around 8:40 p.m., on 18 April, 2022. Louisiana authorities lifted a shelter-in-place order within five hours of issuing it after a chlorine leak on Monday.

Olin Corporation was founded in 1892 and is currently based in Clayton, Missouri, USA. The company's activities are concentrated in three segments: the production of military ammunition and chlor-alkali products, and their distribution. It is one of the main producers of polyvinyl chloride in the USA along with Shintech, Formosa Plastics, Westlake Chemical and Axiall.
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bp intends to invest up to ?18 B in the UK’s energy system by the end of 2030, demonstrating bp’s firm commitment to the UK, and helping the country to deliver on its bold ambitions to boost energy security and reach net zero, said the company.

As one of the largest oil and gas producers in the UK, bp intends to continue investing in North Sea oil and gas, while driving down operational emissions. bp is also in action on a range of lower carbon energy investments in the UK, which are expected to bring jobs and develop new skills and capabilities.

Bernard Looney, chief executive officer, bp, said: “We’re backing Britain. It’s been our home for over 110 years, and we’ve been investing in North Sea oil and gas for more than 50 years. We’re fully committed to the UK’s energy transition – providing reliable home-grown energy and, at the same time, focusing on the drive to net zero. And we have ambitious plans to do more and to go faster. Our plans go beyond just infrastructure - they see us supporting the economy, skills development and job opportunities in the communities where we operate. We are all in."

These projected investment figures are in addition to bp’s significant operating spend in the UK. In 2019, prior to the pandemic, an estimated 0.5% of UK GDP was supported by bp’s activities*. bp also anticipates paying up to ?1 billion in taxes for its 2022 North Sea profits, on top of around ?0.25 billion that it has paid annually in other taxes in the UK in recent years.

As per MRC, Honeywell announced that bp and Honeywell have signed a licensing agreement for Honeywell UOP’s Ecofining technology. bp is undergoing pre-feed engineering for its proposed diesel and sustainable aviation fuel (SAF) project in Western Australia. bp plans to convert hydroprocessing equipment at its former refinery site in Kwinana, Australia, to produce approximately 10kbd diesel and SAF from renewable feeds, integrating with its existing terminal operations.

As MRC informed earlier, bP is seeking to divest the near 20% stake in Russian state-oil company Rosneft it has held since 2013 in the starkest sign yet of the corporate backlash against Moscow’s invasion of Ukraine.

bp is one of the world's largest oil and gas companies, serving millions of customers every day in around 80 countries, and employing around 85,000 people. bp's business segments are Upstream (oil and gas exploration & production), and Downstream (refining & marketing). Through these activities, bp provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world"s hydrocarbon basins and strong market positions in key economies.

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Germany would be able to weather an EU embargo on Russian oil imports by the end of this year even though a stoppage could result in shortages, Economy Minister Robert Habeck said on Monday, appearing to throw his weight behind a ban, said Reuters.

Two European Union diplomats said at the weekend that the bloc is leaning toward a ban by the end of the year as part of a sixth package of sanctions against Russia over its invasion of Ukraine. EU energy ministers will discuss the proposed oil ban in Brussels later on Monday.

"We have managed to reach a situation where Germany is able to bear an oil embargo," Habeck, of the ecologist Greens, told a news conference. "This means it won't be without consequences." Finance Minister Christian Lindner went even further, telling a German broadcaster that the German economy would even be able to stomach an immediate ban.

"With coal and oil, it is possible to forgo Russian imports now," Lindner of the Free Democrats (FDP) told WELT. "It can't be ruled out that fuel prices could rise." Chancellor Olaf Scholz's government is under pressure to reduce Germany's dependence on Russian fossil fuels and he has been accused of lacking leadership after his initial resistance to supplying Ukraine with heavy weapons.

Germany last month cut the share of Russian oil to 25% of total imports from 35% before the invasion. Habeck said the main challenge for Germany was to find alternative oil deliveries to a refinery in Schwedt operated by Russian state company Rosneft which supplies east German regions as well as the Berlin metropolitan area. Those areas could face supply shortages in the event of an EU embargo if Germany can't secure alternative oil imports by the end of the year, Habeck said.

"We still have no solution for the refinery in Schwedt," said Habeck. "We can't guarantee that supplies will be continuous. There will for sure be price hikes and there will be some outages. But that doesn't mean we will slide into an oil crisis." An advisor to Scholz told the Financial Times in remarks published on Sunday that Germany backed the planned EU embargo on Russia oil but wanted a few more months to secure alternatives.

Joerg Kukies told the newspaper that the goal was to ensure Schwedt is supplied with non-Russian oil brought by tankers to Rostock on the Baltic Sea. To allow this, the port of Rostock would have to be deepened and work done on the pipeline linking it to Schwedt, he said.

As per MRC, Rosneft failed to sell oil in a jumbo tender after demanding prepayment in roubles, meaning the country's top oil company will need to find ways to divert more crude to buyers in Asia via private deals. The failure of the tender highlights a growing struggle by the Kremlin oil major to sell oil due to sweeping Western sanctions on Russia for the invasion of Ukraine.
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