Opportunities and Risks

Geopolitical developments, in particular the Russian war against Ukraine, and their impact on gas supply and energy prices are having a considerable influence on Covestro’s business, especially in the EMLA region. Covestro has to date received gas supplies to meet its demand, although there is uncertainty about future supplies because, if the gas supply to companies were to be rationed, this could necessitate the closure of entire production locations or of certain production facilities of Covestro in Germany, depending on the scale of the reduction. This could in turn result in production outages of certain chemical precursors, intermediates, and by-products that are needed at other sites in the EMLA region.

The tense situation on the energy markets, especially in the EMLA region, exacerbated further in the third quarter of 2022 and led to a substantial rise in energy prices, particularly in Europe. If energy prices remain at this price level, this would pose a risk to the global competitiveness of European production locations and could lead to production facilities being decommissioned in the short term or being closed down altogether in the medium to long term.

Several teams of experts in the company are monitoring the current situation closely, studying the consequences in detail, and working on mitigation plans. The potential losses are being analyzed continually; and these analyses are integrated into existing processes to also monitor factors such as risk bearing capacity.

As a result of the assessment of the aforementioned risks as well as with regard to the Covestro Group’s other opportunity or risk factors, no material changes have been made to the presentation of risk categories in the Annual Report 2021. At the time this Quarterly Statement was prepared, there were no risks that could endanger the Group’s continued existence.