Covestro to Seek Acquisitions During Next Five Years

Materials supplier Covestro AG will be looking to bolt-on acquisitions to boost its specialty business and add tailored solutions for its customers in the next five years, according to CEO Patrick Thomas.

During a financial presentation in London, the Leverkusen, Germany-based company said it had significantly outgrown its industry since it began trading its stock in 2015 following its spinoff from Bayer AG. It recorded core volumes expansion of 10.4 percent between 2014 and 2016 and higher free operating cash flow of by 73 percent in the same period.

From 2017 onward, however, the company expects to grow in line with its industries, projecting a cumulative free operating cash flow of 5 billion euros ($5.7 billion) during the next five years.

The cash flow, according to Thomas, who also is interim chief operating officer for Covestro, will go towards three policies, including paying “attractive dividend” and bolt-on acquisitions to boost Covestro’s specialty business.

“Lastly, we have no reason to hoard liquidity if no significant external investment opportunity arises. We intend to return excess cash to our shareholders after 24 months without significant M&A activity. This return could be done via share buybacks or special dividends,” the CEO explained.

The German company also announced its ambitions to differentiate products.

Covestro is working on further detaching its business from cyclical demand, partly through close collaborations with customers and tailored innovations.

More than 50 percet of its sales, and around 70 percent of earnings at Covestro are generated with resilient businesses, according to data from its 2016 fiscal year.

“We are well prepared to develop tailored solutions and become even more customercentric. In addition, we are continuously looking for new ways to embed sustainability in our products and processes,” said chief commercial officer Markus Steilemann who is taking over as CEO next September.

Some of the key milestones achieved by Covestro in sustainability include alternative resources such as biomass for coatings, using CO2 instead of oil-based feedstock for polyols, and bio-based aniline.