© Reuters. Covestro logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration
(Reuters) -German chemicals maker Covestro on Tuesday cut its 2022 earnings guidance for the third time this year and reported weaker-than-expected quarterly profits, blaming high gas and raw material prices amid the deepening European energy crisis.
The company, whose main products include foam chemicals used in mattresses, car seats and insulation for buildings, said it was only able to offset the sharp rise in raw material and energy prices to a small extent by higher prices.
Covestro now sees 2022 earnings before interests, taxes, depreciation and amortisation (EBITDA) in a range of 1.7 and 1.8 billion euros ($1.7-$1.8 billion), compared to a previous forecast of 1.7-2.2 billion.
It also lowered its free operating cash flow (FOCF) forecast to a range of 0 and 100 million euros from a previous range of 0 to 500 million euros.
Covestro also reported third-quarter EBITDA fell 65% to 302 million euros, below the analysts’ average estimate of 320 million euros in a company-provided poll.
The profit warning and results come after Germany outlined plans earlier this month to spend almost 100 billion euros to try and ease pressure on consumers, including industrial customers, from surging gas prices.
Chemical companies are among the hardest hit by the energy crisis because they use gas both as a raw material for production and as an energy source.
“We will have to cope with this unprecedented environment for the time being. We’re therefore using all the levers available to us to steer Covestro through the current situation,” said chief executive Markus Steilemann in a statement.
The company said in August replacing gas as a raw material was not yet possible, and options for replacing it as an energy source were also limited, though the company was testing where it could replace the fuel with oil.
($1 = 1.0121 euros)