Covestro cuts 2023 guidance, sees improvement next year as takeover talks progress

By Bartosz Dabrowski, Andrey Sychev and Tom Käckenhoff

(Reuters) -German chemicals maker Covestro on Friday cut its annual profit target to the low end of its previous range but pointed to potential improvement next year amid takeover talks with Abu Dhabi National Oil Company (ADNOC).

The company, whose main products include foam chemicals used in mattresses, car seats and buildings insulation, forecast 2023 core profit (EBITDA) of around 1.1 billion euros ($1.2 billion), at the bottom of its prior range of 1.1-1.6 billion euros.

For 2024, it expects mark-to-market EBITDA at around 1.4 billion euros, assuming the market environment improves.

"Things will tend to be a little better next year, supported by China and the automotive industry in particular," Chief Financial Officer Christian Baier told Reuters, adding that the recovery was likely to come in the second half of the year.

The company shares were up 2.5% at 0730 GMT.

Inflation takes a toll on spending by chemical companies' customers, as most of them still have bloated inventories that were built up during sluggish demand.

In September, Covestro entered into open-ended discussions with suitor ADNOC over a potential takeover. The offer, which has boosted the company's shares by 35% since first reported in June, would value Covestro at about 11.6 billion euros.

"We actually go into these discussions with an open mind," Baier said, declining to disclose how long talks with ADNOC might take.

Covestro said late Thursday it had ended a share buyback programme ahead of schedule at 200 million euros, falling short of the intended 500 million, due to "the current overall situation".

Its third-quarter EBITDA fell 8.3% to 277 million euros, missing analysts' average estimate of 282 million in a company-provided poll.

($1 = 0.9466 euros)

(Reporting by Bartosz Dabrowski and Andrey Sychev in Gdansk; Editing by Milla Nissi and Mark Potter)