Plastics maker Covestro looks past China slowdown

Plastics maker Covestro, formerly Bayer MaterialScience, remains optimistic about the mainland market despite the prolonged slowdown in construction and manufacturing activities that saw its third-quarter sales there slump 7 per cent year on year.

The German firm is counting on diversification of its markets and product lines to hedge its risk amid volatile global economic conditions, its chief financial officer, Frank Lutz, said.

“We are not dependent on one country and not on one product,” he said. “We are still extremely happy with our business development in China … even if there is only 5 per cent growth in China for the next couple of years, it would still be a fantastic number for us as it is still be a bigger growth rate than most of the regions that we have operation.”

In the third quarter of this year, Covestro’s China sales dropped 7 per cent year on year to €453 million (HK$3.7 billion), compared to 5 per cent growth in the United States to €680 million and a 2 per cent rise in Germany to €415 million.

For the first nine months of the year, its China sales grew 5 per cent, while those in the US increased 4 per cent and Germany was flat.

“What we saw was that business confidence in China in the third quarter went down, so our customers released their stock [to their customers and cut purchases] … we don’t think this is a general [trend] because once destocking has happened, our customers will start buying again,” Lutz said. “It is a reflection of the uncertainty in the third quarter so that people got more cautious.”