We had a pleasant interview with Dr. Martin Merkens, Responsible for Sales and Market Development with the Coatings, Adhesives, Specialties segment at Covestro, in the Europe, Middle East, Africa and Latin America Regions about the establishment of the company and innovations which serve to the sector.
Could you please briefly tell us about your education and professional background in the sector?
I am a PhD chemist with an additional background in economics. I am working for 20 years at Covestro and Bayer in the field of coatings and adhesives raw materials. I held various functions covering responsibilities for sales, application development as well as product management. Since February 2020 I am Responsible for the Sales and Market Development in the EMEA/LATAM Region within the Business Unit Coatings, Adhesives and Specialties.
Could you please tell us about the development process of Covestro from its foundation to the present day?
Covestro was founded in 2015 and is listed in the German DAX 30 stock market index since 2018. The predecessor company Bayer Material Science (and before that Bayer), discovered and patented polyurethane chemistry in 1937 (Prof. Otto Bayer).
Could you please tell us about your products, your target group and the industries that you serve?
Our business is currently managed by three business units: Polyurethanes, polycarbonates and coatings, adhesives, specialties.
The coatings, adhesives, specialties segment of Covestro develops and supplies substances that make end products more attractive and durable, enhance their value and give them a special, final touch. At the same time our materials often bring a productivity boost with them by reduced curing times, faster processing or less solvent demand. What makes this business unit stand out from the competition is its distinctive business approach: we develop our solutions not just for, but together with our clients along the entire value chain to make the world a brighter place.
Could you please tell us about your sale activities? Predominantly, which regions, do you focus on?
Our headquarters is located in Leverkusen, Germany, in the Rhineland, one of the leading regions for the chemical industry in Europe. We are operating in four regions globally: North America, Latin America, Asia Pacific and Europe, Middle East, Africa. This enables us to be close to our customers and serve regional supply chains and environmental regulations. As a global player, Covestro runs a strong network of production sites.
What do you think about being a global manufacturer in chemical industry?
Covestro operates around 30 production sites in Europe, Asia and the United States. They range from smaller facilities designed for regional purposes to world-scale production plants that ensure efficient and reliable supply to customers with a global presence. The continuous technical optimization of our asset base has a high priority for us: our sites set standards in quality, efficiency and safety.
Covestro´s major production sites are located here: Baytown (USA), Map Ta Phut (Thailand), Shanghai (China), Antwerp (Belgium), Brunsbuettel (Germany), Dormagen (Germany), Krefeld-Uerdingen (Germany), Leverkusen (Germany).
In addition, there are technical centers and innovation hubs around the world – all with the aim of being as close as possible to our customers.
Could we learn about after sales services and customer satisfaction philosophy of Covestro?
Customer Centricity is a corporate philosophy that places the customer’s needs in the center of everything our company does. All of the organization’s activities and processes are considered from the customer’s viewpoint. Therefore, the expectations and needs of our customers are the starting point for anything our company undertakes.
At Covestro, Customer Centricity is based on three pillars: Knowing the customer: Always placing the customer first by making customer opinions and customer needs visible. Thinking customer-first: Ensuring a customer-centered approach in all company areas and functions. Co-Creating Customer Value: Using customer feedback as a starting point to generate added value for our customers.
We monitor the situation in close cooperation with our customers and stay in constant contact with them through our communication channels. As the COVID-19 pandemic develops, we have been continuously adapting to our customers’ needs as well as to the realities of the market situation.
We run an annual customer satisfaction survey, based on the Net Promoter Score (NPS) methodology, and have achieved scores at the top end of the range for the chemical industry.
Have you recently had an innovative product launch which will make a difference in coating sector?
Covestro covers four main industry sectors: Automotive, Infrastructure, Industrial Coatings and Industrial Adhesives. Turkey is a key market in the Industrial Coatings sector due to its large wood and furniture industry. We continuously launch products throughout the year. Let me share for example three products with relevance to the wood coatings market: Bayhydur® eco 701-90 – partially bio-based: Features 61% renewable carbon content derived from biomass. Chemical-resistant: Resists change from internal and external factors.
High-performing: Offers same smoothness and durability as conventional fossil-based coatings. Low carbon footprint: Significantly reduces cradle-to-gate carbon footprint compared to HDI derivatives. Bayhydrol® eco UV 2877 – a multi-curing partially bio-based polyurethane dispersion. In addition to conventional UV curing, it is also capable of oxidative self-crosslinking.
This leads to higher process safety in shadow areas or in case of inhibition due to UV absorption from pigments, as it enables coatings to achieve outstanding resistance and hardness even in area that receive little or no UV light. In addition, this product can accelerate the coating process by up to 50% thanks to faster drying.
With Bayhydur® quix 306-70, Covestro offers a hydrophilic isocyanate hardener for 2K water-borne (WB) PU wood coatings, which cures as fast as 2K solvent-borne (SB) systems, and up to 60 % faster than standard WB coatings. Moreover, a recent Life Cycle Assessment (LCA) study has demonstrated that Bayhydur® quix leads to a reduced CO2 footprint compared to 2K WB and SB PU systems, without sacrificing their advantageous properties.
Day by day technological developments and digitalization offer innovative opportunities to many sectors. What are your activities on digital transformation?
Digital communication – through Covestro’s digital B2B trading platform, the Covestro Direct Store powered by Asellion – we enable customers to do business around the clock and buy products conveniently, flexibly and securely via a digital sales channel. Covestro is also available on all digital channels and we encourage our customers to use this option. The Covestro Solution Center offers information on our entire portfolio, it lets customers compare products side by side or request samples. Via Order@Covestro, our digital order platform, customers are able to place, track and trace their order and receive important alerts and notifications regarding the delivery status.
Digital operations – Covestro is also actively driving digital technologies and processes in research and development (R&D). Investments in the expansion of the company’s computing capacity are a central element. The powerful computing heart for digital research is located in Leverkusen and will be continuously expanded in the course of next year. The planned hardware expansion will significantly increase computing power through high-performance computing and thus digitally support worldwide R&D activities. In addition, Covestro cooperates with competent partners such as RWTH Aachen University.
Digital business models – Covestro is working in close cooperation with other pioneers in various industry sectors to broaden the types of materials available for Digital Printing and 3D Printing. In this way, our expertise helps to bridge the gap that still lies between the innovative printing methods and their application in series production, e.g. the use of thermoplastic polyurethane for laser sintering
What are the new decisions you make while managing the pandemic process? Could you please tell us about your activities during the pandemic?
Since the beginning of the crisis, Covestro has been continuously monitoring the development of the situation and attaches the highest priority to protecting its employees and their families worldwide. In addition, the company has implemented a number of direct measures in previous months to provide local support to health and care facilities.
The safety of employees and customers is our top priority. We installed strict health measures at all our locations to comply with local regulations.
We have taken action to ensure a stable supply and technical support, and this has been well received by customers.
Could you please tell about your sustainability and R&D activities?
Guided by our purpose to make the world a brighter place, Covestro develops products and solutions that push the boundaries of what’s possible. We also ensure this belief is deeply embedded into our understanding of sustainability.
We are aligning our research and development projects (R&D) to address the Sustainable Development Goals of the United Nations. By 2025, 80 percent of our R&D project spending will be targeted in areas that contribute to achieving these goals, either undertaken in partnership or endorsed by recognized institutions.
Covestro is also fully committed to making the circular economy a model for a truly sustainable world. To this end, we want to completely align our entire production and product range to the circular concept and finally become fully circular ourselves. This strategic vision is being gradually implemented through numerous concrete measures and projects. In this way, we want to accelerate the change to a circular economy, especially in the chemical and plastics industries, and contribute to the goal of a greenhouse gas-neutral economy.
Specifically, we aim to convert our production facilities worldwide to alternative raw materials and renewable energy. In addition, over 20 projects across Covestro are researching new ways for more and better recycling.
We are drive the change through 4 strategic pillars: Alternative raw materials: biomass, CO2 as well as end-of-life materials and waste replace fossil raw materials such as oil; carbon is circulated. Innovative recycling: energy-efficient new technologies ensure increased and effective recycling of end-of-life materials and waste. Common solutions: to advance the circular economy, Covestro pursues cross-sector cooperation. Renewable energies: the circular economy is only really sustainable if electricity from alternative sources is also used
What else would you like to add?
Covestro announced on September 30, 2020 that it is in the process to acquire a leading sustainable coating resins business from DSM, making Covestro one of the global leaders in the attractive growth market for sustainable coating resins.
Combining strong innovation capabilities to accelerate transition to circular economy. Complementary product portfolios and application industries excellently positioned to meet customer needs, including highly specialized, market-leading products such as resins for use in paints and other industrial applications such as packaging, and optical fiber coatings. This also includes a VOC-free adhesive and a proprietary production technology for fully recyclable carpets, mattresses and furniture components.
The acquisition also adds to Covestro’s digital transformation by providing additional performance materials and application expertise in 3D-printing, as well as Advanced Solar coatings products – high performing anti-reflective coatings – for solar glass markets.
Acquisition adds EUR 1 billion in revenues and EUR 141 million EBITDA. Purchase price of EUR 1.61 billion reflects attractive enterprise valuation of 5.7x EV/EBITDA 2021 including future synergies. Substantial synergies of around EUR 120 million p.a.