Analysis | news
Covestro sees China as centre for growth and sustainability
Prototype of wind turbine rotor blade made with polyurethane composite, pictured in front of Covestro’s research centre in Shanghai, China
The market in China is changing to one of qualita- tive growth, says Patrick Thomas, and Covestro is aiming to benefit. David Eldridge reports
Patrick Thomas will step down from his post as CEO of Covestro in 2018 after successfully steering the polycarbonate and urethanes group through its split from Bayer Group. At the German group’s Capital Markets Day in London on 29 June, he said Covestro had “significantly outgrown its industry” since its IPO in October 2015, recording core volumes growth of 10.4% between 2014 and 2016 and a 73% rise in free operating cashflow over the same period. That fast pace will slow
from 2017 onwards, and Covestro expects to grow in line with the industries it supplies that are forecasted to grow above global GDP. Even so, over the next five years it anticipates generating a
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cumulative free operating cash flow of €5bn, some of which may be used for bolt-on acquisitions.
Acquisition activity has so
far not been a major feature of Covestro’s post-Bayer strategy, which has focused its investment instead on its existing production assets. Last year, the group completed a project to double production capacity for polycarbonates from 200,000 to 400,000 tonnes per year at its site in Shanghai, China. This capacity will jump again in 2019 to 600,000 tonnes per year following another investment announced in May this year. In MDI, Covestro likewise said it would double capacity to 400,000 tonnes per year at its plant in Brunsbüttel, Germany. Further debottlenecking projects and brownfield investments are in the pipeline, the company said. The market in China is key
for Covestro as it pursues its growth plans. Patrick Thomas elaborated on this theme at a
media day in London in May: “We run our global polycar- bonate business from Shanghai, and most people think of us as a Chinese player,” he said. For Covestro, this benefits its image in China and draws them closer to Chinese customers. “The secret is, are you just importing stuff into China, or are you making stuff in China and contributing to the development of new technolo- gies? We have been operating a research facility in China for over 15 years.” The wind energy market
provides an example of Covestro’s position in China. The company built its first turbine blades using its polyurethane materials in China in 2016. The reason it did this, said Thomas, is because it is the most demanding market for this application. In June this year, the company received DNV GL certification in China for its new polyurethane resin and glass fibre fabric compos-
ite system for making rotor blades.
China is Covestro’s biggest national market in terms of sales volume and it has similar profitability to any other country, said Thomas. “I think people don’t understand how China has changed. Previously everything was quantitative – more PVC, more polyolefins etc. The nature of growth now is qualitative.” China is no longer the
export-dominated economy it once was, but instead is an important market particularly for products that respond to the country’s policy-driven focus on sustainability. Thomas said: “The greening
of the economy in China is what’s driving for us a level of growth in the country that is much higher than anybody else is seeing there. Because the industries we’re support- ing are the ones that are part of this qualitative growth. It’s not just [growth equivalent to] GDP, it’s a multiple of GDP. In
August 2017 | COMPOUNDING WORLD 21
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