The Dreams of Today Inspire the Innovation of Tomorrow
— Interview Covestro China

1. Under the new company name Covestro from September 1, 2015, what did Covestro China do over the past year, in aspects of innovations, production and others?

Covestro delivered a successful year of operations in the first year of independence.
In 2015, globally we achieved all the financial targets. Our adjusted EBITDA increased 41.3% compared with 2014, and our free operating cash flow reached a record level. In the first half of 2016, our core volumes increased by 8.1% globally and net income grew by 54.3% to Euro 412 million. Our substantial growth in China contributed significantly to the global business performance, accounting for 16% of global sales in FY 2015 and growing core sales volumes by 14% in the first half of 2016.
In addition to our outstanding business performance, we have also continued our track record of innovations. At our newly inaugurated plant in Dormagen, Germany, CO2 is now being used as a raw material in the industrial production of Polyols for the first time. We have also successfully made the very first PU wind blade in China by collaborating with our value chain partners in the wind energy sector.
As for production, at Covestro Shanghai Integrated Site, we have launched another HDI facility, making the site one of the largest HDI production centers in the world.
The first year of independence is truly a colorful and fruitful year.

2. On May 8, 2015, the State Council of China issued a ten-year national plan “Made in China 2025”, with five key guidelines of innovation, quality, environmental protection, structure reform and talents. How are Covestro’s strategies responding to these changes?

The program embraces China’s move towards an Industry 4.0 approach and aims to enhance the connectivity and automation level of the manufacturing sector. The idea is to build smart factories with adaptability, adhering to resource efficiency and human factor engineering, while also integrating customers and business partners into the business processes and value flow.
With an innovation legacy of nearly 80 years and a good track record of adjusting technologies to fit the needs of the market, we believe we are well positioned to be an industry leader in this field. Many of our production plants are already fully automated, for example in operation, monitoring or advance-control. So intellectualized manufacturing is already operational on the ground in China.
China has shown tremendous progress in innovation over the recent years but needs to increase efficiency (also to enhance contribution to GDP growth). We are ready to support not only with products and applications, but also with best practices on R&D management based on 15 years of experience in the region. With a 15 years history of R&D in China we were one of the first companies running an R&D Center in Shanghai – the Polymers Research and Development Center. We believe that we made a lot of progress and gained many experience over this period of time we are now benefitting from.
For example, we utilize CO2, widely perceived as greenhouse gas, as part of the raw materials to make polyols that can be made into flexible foams used to produce mattresses. Here in China, Covestro, together with the Automobile Coatings Association (ACA), Chemical Industry and Engineering Society of China (CIESC) built an innovative knowledge sharing platform—Covestro South China joint lab, helping the local coating makers connect with the latest coating technology and shorten the lead time to market for new products. The main research focus includes super-fast drying clear coat and waterborne base coat for auto refinishing. The platform helps to solve the common technical difficulties with the innovative auto refinishing technology and share the latest application experience.

3. What products and solutions does Covestro China offer to solve compelling challenges facing today in the country, for example in increasing mobility, urbanization, population growth and demographic change?

Covestro believes that high-tech polymer-based solutions will help face those challenges long into the future. We are looking for better ways of feeding, housing, clothing, and caring for people who live on this planet as well as ways of protecting the natural resources on which everyone relies.
Take our solutions for increasing mobility as an example. We are offering materials that are lighter and more eco-friendly. Side windows, sunroofs and windscreens made from Covestro polycarbonates are tougher and up to 50% lighter than comparable glass substrate. This makes vehicles much lighter, reducing fuel consumption. New LED lights with polycarbonate lenses consume up to 70% less energy, and coatings made using polycarbonate raw materials from Covestro help reduce energy consumption and emissions, and improve the durability and aesthetics of cars.
Examples of Covestro solutions helping the rail industry include a collaboration with China South Railway, the leading public transport manufacturer in the Asian country. This railway giant has been using polycarbonate sheets for its subway cars, their light weight helping to reduce both fuel consumption and CO2 emissions.

4. Could you please introduce cooperation cases for Covestro China to propel business growth and better meet local demand?

To further capture the growth opportunity from this evolving market, Covestro has taken a number of steps to inspire value-add solutions and better meet local demand.
Take the construction sector as an example.As urbanization in China progresses, energy consumption of buildings has become a key societal challenge. Currently, China’s building energy consumption accounts for 47% of China’s total energy consumption. In order to alleviate this situation, local Chinese government has proposed strict and detailed criteria for energy conservation of buildings. Among these criteria, window systems are a key focus in the energy consumption, and so they attract a great deal of attention.
As one of the world’s first resin supplier that applies polyurethane composite in system windows, Covestro is collaborating with downstream enterprises in the industry chain to innovate and to meet rigorous regulations of the energy-saving window systems proposed by the Chinese government.
Covestro is now working with window system manufacturers to develop window profiles with Baydur polyurethane composite. Baydur polyurethane composite can significantly lower the thermal conductivity of a window system with excellent performances in mechanical strength, air tightness, fire-resistance, or other performances. Baydur polyurethane composite brings overall enhancement and performance-cost advantage to the window system.
Covestro provides support in processing technique of resin composites to manufacturers of window system. Covestro also tests and evaluates the material and application, helping manufacturers solve any technical difficulties with manufacturing. Manufacturers, designers, and contractors of window systems receive solid market support and comprehensive solutions are offered to any participants in the industry chain. Covestro is leading the system windows to step into “energy conservation 2.0”.

5. What did you do to incubate the talents for the needs of the chemical industry in China?

People is Covestro’s precious assets, in addition to caring about our own employees career development within the company, the program named Covestro-Tongji Eco-Construction & Material Academy is a very good reflection of our talent incubation in China.
The Academy was established in 2011 to promote the eco-building concept and knowledge, advance research and development of green construction materials, as well as enhance public awareness of environmental protection and energy efficiency.
The academy has now become a very successful platform to develop future talent for the building and construction industry, and significantly raises Covestro’s profile as a leading eco-friendly building material solution provider in the construction sector.

6. Covestro recorded positive results in the first half of 2016 and raised outlook for the full year. How is outlook of Covestro China for 2016?

Globally, due to our outstanding business performances in the first half of 2016, we now expect a mid- to high-single-digit percentage increase in core volumes (previously: mid-single-digit percentage).
We always regard China as our “home market”. With around Euro 3 billion of investment in this crucial market, we are now fully invested and we are ready to capture the growth in China. China’s focus from investment-led economy to innovation-driven economy has given and will continue to give Covestro opportunities to upgrade people’s lives by utilizing cutting-edge and sustainable materials. So we are committed to the market and we will embed ourselves deeper here, by customer-centric R&D and solutions.