Covestro AG (1COV) Earnings Call Transcript & Summary

[Presentation] [Audio Gap] [Interpreted] And I'm pleased that Covestro made it through this difficult time. A lot of people talk about a polycrisis. The Board of Management will go into more detail as to how these challenges can be countered. And at this point, I would like to turn to the topics of the Annual General Meeting. As a result of progress in digitalization and their positive experience with virtual AGM during the coronavirus pandemic, the legislator adapted the Stock Corporation Law in July 2022 to allow virtual AGMs to continue. And against this background, the Board of Management and the Supervisory Board decided together to conduct this year's AGM as a virtual meeting. We're not talking about the virtual format that we are familiar with from the last 3 years during the coronavirus pandemic. We're talking here about a new and improved format with far-reaching shareholders' rights. Unlike past years, you, our shareholders, will have the possibility today to enter into a dialogue with the Board of Management and the Supervisory Board of your company. We are looking forward to that very much. Today, you will have the possibility to request the floor electronically. And when I call your name, you can speak to us live by video transmission and also to speak to your shareholders and to ask your questions. I'll explain the whole process to you in more detail later on. At this point, let me say the following. With the new legal situation, the German legislators have made a virtual AGM basically the same as an in-person meeting and have strengthened shareholders' rights. The new virtual AGM will be more interactive. It will be livelier. And certainly, more intense than we've been used to in the past few years. We are aware of the fact that not only a few of you really appreciate direct contact and dialogue with us. We, too, let me -- assure you, we have always appreciated such direct contact and exchange with you. But we weighed the pros and cons for this year's AGM, and we decided that the advantages outweigh the drawback. So let me mention the following: a higher reach, which means that with the virtual meeting, investors who are far away can join us much less time and cost. We save time and cost also for you, our dear shareholders, because you no longer have to travel to the AGM. And last but not least, a much more positive economic impact because this is something which clearly makes a significant contribution to climate protection. And for these reasons, the Board of Management and the Supervisory Board will be recommending that we authorize the Board of Management to also allow for virtual AGMs. This is as will be the case this week and in the coming days and weeks, where other listed companies are making the same recommendation to their shareholders. This authorization is to be in line with the legal requirements, it will be limited in time, but we do not want to exhaust the maximum 5 year limit. Instead, we are recommending authorization with a term of 2 years. What we're trying to show you is that in the next 2 years, we want to deal with this authorization in a responsible way and we will be selecting a design for our AGM. We will inform you extensively and that you can best and most effectively exercise your shareholder rights. If you go along with our proposal, the Board of Management will also take into account the agenda items, and they will also decide on the format of each respective AGM. Should we decide in favor of a virtual AGM, then the Board of Management in line with legal requirements will also decide on the rights for the shareholders to ask questions. The way we see things today, we tend to believe that in future as well, shareholders will be able to ask the questions during a virtual AGM as is the case today for today's regular AGM for 2023. In other words, we do not want to refer to questions that you would ask before the AGM and then only allow for follow-up questions during the meeting. This is also something that we mentioned in the documents received with the notice of today's AGM because, of course, you want to have an impression as to how we will be dealing with the discretion we have been given in the future as well. So ladies and gentlemen, following these preliminary remarks, I'd like to come to some of the formalities of today's AGM. We will be transmitting the AGM from Covestro's business premises in building [ Q24 ] in the Chempark in Leverkusen. This room is [ G165 ], is the in-person area with podium is as well as the neighboring rooms [ G167 and G163 ]. I would now like to welcome those of us here on stage with me. I'd like to welcome our notary public, Dr. [ Mark Hamman ] based in [ Kone ] who, as in the past years, will be taking the minutes of today's AGM. The Board of Management is also here in full. I would like to welcome the CEO, Dr. Markus Steilemann; Dr. Thomas Toepfer, our CFO and Labor Director; Ms. Sucheta Govil, who is responsible for sales and marketing; and Dr. Klaus Schäfer, who is our CTO. The Supervisory Board is also present here in Leverkusen. The members of the Supervisory Board are in a different room due to a lack of space but they will be in this area and can contact us at any time. We will be showing you the Supervisory Board members every now and again in our transmissions so that they will be visible to you, our shareholders. Our Supervisory Board member, Lise Kingo, was not able to travel from abroad to Leverkusen. That is why she is participating virtually. She will be in attendance for the whole meeting as you could see on the screen. The only one who is missing is [ Mark ] [indiscernible] he has fallen ill and is excused. We also have Ms. Ina Moritz, who is our proxy as well as Dr. Martin [indiscernible] , who were appointed by the company. Today's AGM will be transmitted live both by video and audio for all of the registered shareholders via the investor portal. Shareholders and the public at large can also follow the entire AGM live on our website and also various social media channels will also be transmitting our AGM. But this would only be up to and including the Board of Management speeches. The necessary technical requirements for our live transmission were carefully checked by our service providers, and we assume that today's AGM will run smoothly in technical terms. Notary public also taken a look at the technology involved and is aware of the provisions that have been taken. However, with video and audio transmissions, there can also be fluctuations also with regard to the availability of the investor portal and this is something that the company has no influence on. Should there be any technical problems, please check your Internet link and update or change perhaps your browser. If the transmission continues to be interrupted, then just be patient for a few minutes. If the disturbance is at our end, then, of course, we might use our fallback system. And if that is the case, we will inform you via our investor portal. If there are problems in the audio transmission, we will show information in the video transmission and conversely if there is a problem with the transmission, then of course, we will try to make sure that the complete transmission is reestablished as quickly as possible. Ladies and gentlemen, in accordance with the transitional requirements and provisions for virtual AGM, which are convened up until and including the 31st of August 2023 and they decided also with the approval of the Supervisory Board on the 16th of December '22, that this AGM will take place without the physical presence of the shareholders or their representatives and that this will be a virtual AGM. The requirements for a virtual AGM have thus been fulfilled. The major reasons for this decision is something that I described to you at the beginning. With regard to granting certain rights, it is something that I will talk about a bit later. But right now, I'd like to note the following: notice today's virtual AGM was published in the Federal Gazette on the 7th of March 2023, including the agenda and the draft resolutions from the Board of Management and Supervisory Board in due form and time. The documents are with the Notary Public and will be included in the minutes. We did not receive any requests for additions to the agenda nor did we get any counter motions or election proposals. The company received a statement which was published by the due date in the investor portal and on our website. Since the 7th of March 2023 when the notice was published, all of the required documentation and information was made available on Covestro AG's website. The documents also will be available for the entire duration of today's virtual AGM. One example of all of the required documents is here in this room with [ Dr. Hamman ], our notary public. Ladies and gentlemen, so that you can ask your questions on updated information, we have also published the CEO's and CFO's speeches as well as my own speech. One week before the AGM, these were published on the company's website. Ladies and gentlemen, of course, we will also, as required by law, keeping a list of participants. Here, you will see the company's representatives, proxies as well as the shareholders represented by them with their equity holdings. In addition, the list of participants in accordance with the new legal requirements will list all of the shareholders or their representatives who have registered for today's virtual AGM via our Investor Portal. The list of participants is available here in the meeting room and it is available on the Investor Portal for the shareholders who have registered via the Investor Portal. It will be updated on an ongoing basis, whenever necessary. I will be announcing the number of attendees during the course of the AGM. Ladies and gentlemen, shareholders who registered in due form and do time were able to exercise their voting rights prior to the AGM either by absentee [ ballot ] or by granting authority and instructions to the company's representatives. And during this meeting as well, we also made it possible to vote electronically, and you can also give instructions. The possibility to authorize representatives from the company via the Investor Portal or to give them instructions will be open until the beginning of the vote. Possibility to vote electronically via the Investor Portal will last a few minutes longer until, I, as the Chair of this meeting, conclude the vote. When we get to the vote, I will then draw your attention once again to the relevant points in time. But I would like to call upon you now to vote in a timely manner. And information on voting can be found in the notice to this meeting as well as on Covestro's website. Ladies and gentlemen, as I said, this year, unlike previous years, we have the possibility for you to request the floor using a button in the main menu of the Investor Portal. Now I'll explain to you the most important aspect, both for the content of your contributions as well as the formal process, which we want to use to conduct today's discussion. First of all, let me talk about the content. Please, your contribution should be such as would be the case in an in-person meeting. Only speak to items on the agenda as well as if need be to the bylaws and do not digress to irrelevant items. I'd also like to ask you to be brief in the interest of the other shareholders who may also want to take the floor. As a guideline, I would like to mention a period of 10 minutes. I'd like to make 1 point clear. This is not a formal speaking time restriction or limitation. It is a nonbinding request. But I would be very grateful if in the interest of everyone concerned, you could focus on the 10-minute guideline. We will be using a clock to show how long someone has been speaking. As Chairman, I'm called upon to make sure that our AGM is conducted in accordance with the law and appropriately. This means that I can also formally limit your speaking time should this appear necessary during the course of our AGM. In particular, with regard to the number of requests for the floor that have not yet been dealt with. Today's discussion will be a general discussion as you are familiar with from earlier in-person meetings. So you will have the possibility to discuss all agenda items, and you do not have to sign in the individual agenda items. As Chair, I am also called upon -- to decide upon how you should ask your questions. As in the notice, I would like to note that questions can only be asked via video transmission. If you want to ask a question, please sign in via the Investor Portal saying that you want to take the floor and then you can decide whether you want to speak, ask questions or both. Similarly, you have to request the floor if during today's meeting, you want to present a motion whether this deals with the Articles of Association or if you want to present an election proposal. When you request the floor in the Investor Portal, you can also inform us that you want to present a motion and I would be grateful if you were to do so. So I can look and see if your motion should perhaps be given priority in giving you the floor. And now I'd like to give you some technical details for your request for the floor and how we are going to conduct our discussion. When you request the floor, you will be put on our list of speakers. The speakers will then be divided up into groups of about 5 people max. These 5 people will then be called out. Before we begin our discussion, I'll call out your names. And I'll ask you to be ready for a test for your audio and visual transmission. We will then interrupt the AGM for about 5 minutes. And during this period, our technical team will carry out the technical test with the speakers that I have called out. Then we will continue the AGM, and I will call out the speakers one after another and give you the floor. You will then make your contribution via video transmission. And then you can also be seen and heard by your shareholders as well in the public transmission of the AGM. We will collect questions and then prepare the answers. At the end of the last presentation, we will then have a first round of answers and then I will call out the next speakers and we'll repeat the same procedure until all of the speakers have been given the floor and have been able to ask their questions and all the answers have been given. Ladies and gentlemen, I would also like to mention that as of the beginning of this event, up until the end, until I conclude this meeting that you can object to decisions taken by the AGM. You will find a button on the main menu in the Investor Portal. The notary public will then accept any objections we receive and these will be included in the minutes to the AGM. So that should suffice on formalities. Ladies and gentlemen, before we turn to the agenda, I would like to briefly review the past year as seen by the Supervisory Board. As I said, 2022 was primarily a year of hardship and concerns. After decades of peace and stability, war has returned to Europe. As a result, the energy supply situation has drastically worsened with major impact on our industry and our company. This includes the weakening of the economic environment. The overall situation where Covestro has been confronted, so to speak, with a twofold challenge and still is confronted with this. On the one hand, we had to do everything we could in order to maintain operations and business. And on the other hand, in these difficult times, our company also had to continue pursuing its strategic goals and growth opportunities. We were successful at both. Ladies and gentlemen, Covestro, managed the energy crisis, which reached its peak last fall and last winter. Thanks to the excellent dedication and flexibility of our employees. So we adjusted very quickly to the situation. We reduced our energy requirements, improved our efficiency. And in some sites, we switched from gas to oil as our fuel. Strategically speaking, we stayed on course and we continue to focus on circularity, our major vision. So that means we have the right approach in order to both maintain our livelihood on earth and to combine this with sustainable embedded value. A milestone in sustainability strategy at Covestro are our ambitious climate targets, which our company published last year. By 2035, our goal is to be climate neutral in terms of operations. This applies, first of all, for our direct greenhouse gas emissions which we produce in our own production. This is where we're talking in particular about the very climate intensive substance nitrous oxide. Also the emissions from energy sources, which we receive from third parties. These are to be reduced to net zero. But that's not enough. We're also working on a climate goal for indirect emissions from procured raw materials, which would be in up and downstream processes in the added value chain. Climate neutral and circular. This is what our product range is becoming more and more at Covestro. Our Materials and Solutions last year were in demand last year. However, as a result of the weak economy, the volumes declined. But because we were able to achieve higher selling prices on the market, the sales figure grew to a record number. However, the situation was different when it came to profit due to the increased energy and raw material costs and one-off effects as well as exceptional impairments in fixed -- in noncurrent assets and impairments for deferred tax access we had negative net income for the first time. That's why, for the first time, we will not be able to pay you a dividend. Shareholders, we regret this, and we hope that you can bear with us. But I am convinced that our company, due to its good position, will be in the position to pick up on the payments that we had in previous years. And now I'd like to mention one more thing. The negative net income for 2022 is not something that only led to no dividend payment, a difficult economic situation at Covestro also meant that the Board of Management and the employees will not be receiving an annual bonus for fiscal '22. The CEO, Dr. Markus Steilemann; the CFO, Dr. Thomas Toepfer will be going into more detail on this when they talk about the course of business and strategic development. Ladies and gentlemen, that brings us to the agenda as published in the notice. We will begin with agenda item 1. This relates to the financial statements and reports. Ladies and gentlemen, I would now like to hand over to the Chairman of Covestro AG, Dr. Markus Steilemann.

[Interpreted] Thank you, Dr. Pott. And now, we, the members of the Board of Management, also want to extend a very warm welcome to you, our shareholders. We're delighted that you are participating in our Annual General Meeting and we hope that you, your friends and family are doing well in these difficult times. Ladies and gentlemen, shareholders, the last time we met, Russia had just launched its war against Ukraine. Terrible carnage has already been going on for over a year now, and it has led to many other serious problems. But we mustn't give up. And we don't have to either because despite all the misery and difficulties, we also keep seeing rays of hope ways forward and solutions at the political level in our personal lives and at our company, Covestro, of course, courage, confidence and solidarity. That's what will take us forward. Decisive, resolute action is what's required now. This is because there is need for action virtually everywhere. First and foremost, the war that is raging less than 2,000 kilometers away from us has to be stopped. We also have to deal with its many consequences, which are affecting us all very directly. There's the energy crisis in Germany and the rest of Europe, which is causing problems for each and every one of us. It is also hitting our company and the entire industry, the chemical sector. The same applies to the high rate of inflation, which is likewise a consequence of Russia's war aggression. Amidst all of this, we have an ailing global economy. Fortunately, the coronavirus pandemic is receding, but it has left deep scars. That is anything but a favorable environment for Covestro. The state of crisis had a massive impact on our business in 2022. And our expectations for the current year have been dampened accordingly. But there is no reason to be pessimistic, ladies and gentlemen. On the contrary, we are looking ahead with confidence. Right now, we can see that our company has the right setup that we took the right steps in 2022. And we will keep doing precisely this in the future. The redefinition of our company, on which I reported to you at the last AGM has also played its part. It has taken Covestro's efficiency and customer proximity to the next level. Financially, we are on solid ground and our policy of producing in the regions and for the regions makes us more independent from global supply chains. Overall, our strategy is heading onward and upward. Its name sustainable future shows that we are looking way ahead into a positive, sustainable future for our company and for society as a whole. We've taken a lot more in this process than just overcoming the current crisis and problems, which are known to pose enormous long-term challenges such as climate change, the overexploitation of natural resources or damage to the environment. The past year with its droughts and floods demonstrated what humanity has to expect. We, at Covestro, are helping to deal with many of the problems. With our products, technologies and solutions, we systematically address global trends such as sustainable mobility and renewable energy. We're gearing our entire company completely to become fully circular while pursuing ambitious climate targets. I will come back to that in more detail later on. This is how we will fulfill our company's purpose of making the world a brighter place and put ourselves in the ideal position to achieve future growth. As I said, more on this in a moment. My dear shareholders, I now want to delve a little deeper into an issue that concerns us all, the energy crisis. As you know, we need a lot of electricity to produce chemicals and plastics and also steam, which we mainly generate from gas. These resources have become extremely scarce all of a sudden and a lot more expensive than they we're already in Europe, especially in Germany. Our energy costs have almost tripled since 2020. We reacted swiftly and decisively to this situation, thanks to the commitment and inventiveness of many colleagues. They have already made quite a few adjustments within the company with great success thermostat. Let me give you 1 example, chlorine. We need this chemical for 2/3 of our products. We make it ourselves although this process consumes large quantities of electricity. For this reason, experts from various areas at Covestro got together to identify potential savings. The result was a new management model for our chlorine plant in Leverkusen, Germany. It allows us to estimate how electricity prices will change during the course of a month. Now we can identify to the day and minute the most cost-effective time to operate the plant. This pays off as it allows us to save costs in the mid-tens of thousands every week. A great team effort that's made me very proud and only 1 of many ideas and measures with which we responded to the energy crisis decisively, flexibly and collaboratively. This also applies to the many other challenges. All of Covestro's 18,000 employees showed fantastic commitment and did excellent work in 2020, which was a difficult year in countless large and small projects alike. For this, all of us on the Board of Management owe them the greatest respect and we want to offer them our heartfelt thanks. 2022 demonstrated once more that we are a great team that works in solidarity around the world, not least thanks to our exceptional corporate values. Curious, courageous and colorful. Ladies and gentlemen, this set of values and the commitment and know-how of our colleagues also helped us in the past year to tackle the adverse economic conditions. The economy has experienced a significant downturn. Global growth halved in 2022, affecting almost all major industries that we supply. The decline in global demand is slowing down growth in the core industries to which we deliver our products. The construction sector expanded by just 1.2% in 2022. The electrical, electronics and household appliances sector shrank by over 2/3. The furniture industry was also down by almost 4% in 2022 compared to the previous year. Only the automotive industry is performing well. Growth more than doubled here. Overall, therefore, Covestro faced economic headwind in 2022. Despite that, we increased our sales by 13% to a new record high. This is unfortunately not matched by earnings, where we were only able to cushion the massive rises in energy and raw material prices to a limited extent. This is why our operating result or EBITDA was down almost 48% because of one-off factors, our bottom line showed a loss for the first time ever but -- and this is something I want to emphasize once again. Financially, our company, your company remains very stable. Ladies and gentlemen, we again had a cash surplus referred to as free operating cash flow in the crisis year 2022. Simply put, we still have cash on our books. Last week, we published our results for the first quarter despite a decline in demand, the financials for the first quarter were much better than anticipated, as shown by our current earnings. Our resolute implementation of our strategy and measures show that we're on the right path. For this, I would like to thank all our employees for their commitment and dedication in the last few months. We have achieved a milestone on our own steam. Together, we will continue to do all we can to [ match ] the challenges in the coming weeks and months. Our CFO, Thomas Toepfer, will now share some deeper insights into our financial results, and he will outline our expectations for the current year. Having said that, over to you, Thomas.

[Interpreted] Ladies and gentlemen, from me as well, a very warm welcome. It's a great pleasure for me to present to you the results for the past fiscal year. Markus Steilemann has already given you some context for the recessionary environment in Europe and higher market volatility due to the uncertain situation of power and gas supplies. This trend could not be offset by growth in other markets. Since we were able to pass some of the cost increase to customers, group sales rose by 13% to almost EUR 18 billion despite lower volumes. This helped us generate the highest sales in our company's history. As already indicated, we were only partially able to pass on the higher costs. As a result, the very high energy and raw material prices led to a considerable negative pricing delta between selling and raw material prices. While energy and raw material prices kept going up in the course of the year, the options for passing on these prices became increasingly limited. What is more, there was a negative volume effect of around 5%. On the bottom line, our EBITDA at the end of fiscal 2022 totaled EUR 1.6 billion after EUR 3.1 billion being posted at the end of the previous year. Let's now take a look at our 2 segments. The negative pricing delta affects the Performance Materials segment in particular. Due to the commodity type nature of its products, the segment is particularly highly exposed to changes in demand in the market. This limits the opportunities for passing on the energy and raw material prices in a recessionary environment. The sharp decline in the EBITDA margins brings this into sharp focus. While sales were up, EBITDA went down 63% year-on-year to a total of EUR 951 million. We anticipate that year 2023 will remain challenging for Performance Materials. Thanks to its strong specialization, the Solutions and Specialties segment, on the other hand, benefits from closer customer relations and better options to pass on the high costs resulting from rising energy and raw material prices. This segment's greater resilience is reflected by an almost stable EBITDA margin. Despite the decline in volumes, strong sales growth also led to higher earnings. An important operational lever in this context is the fact that the successful integration of the Resins and Functional Materials, RFM business is happening faster than planned. Despite the robust performance in the year 2022, Solutions and Specialties will continue to face challenges in the current year. The financial performance of the 2 segments led to an overall decrease in our EBITDA to EUR 1.6 billion. In the past year, we also had exceptional impairments of noncurrent assets totaling EUR 463 million and impairment losses on deferred tax assets from tax loss carryforwards totaling EUR 255 million. These onetime factors led to a negative income. Since the distribution dividends for fiscal 2020, our dividend policy has specified that between 35% and 55% of net income should be distributed as dividends. Accordingly, we paid a record dividend of EUR 3.40 per share for fiscal year 2021. And again, in line with our dividend policy, we'll not pay any dividend for fiscal year 2022. As our bonus system, the PSP system also focuses on the overall performance of the company, our Board of Management and employees will not receive a bonus payment for the past year as a result of the negative group income. A look at free operating cash flow also highlights just how challenging the past fiscal year was. The sharp decline in EBITDA is reflected mainly from Q2 onwards. We countered this trend specifically with consistent working capital management and in doing so, we were able to generate a positive effect of EUR 312 million, as you can see here. In addition, we had capital expenditure totaling EUR 832 million. Of course, we also invested in maintaining and improving existing plants in fiscal year 2022 with a view to positioning our production in the best possible way and offering our employees safe and modern workspace. Moreover, we invested in expanding our production capacity, Markus Steilemann will tell you more about this in just one moment. As you can see, income tax is totaling EUR 538 million were also incurred in fiscal year 2022. Now this amount was driven predominantly by a geographical mix that was unfavorable from a tax perspective. The other effects item relates primarily to the bonus payment for fiscal 2021, which will turn into a cash flow -- cash outflow in Q2 of 2022. That means that for the year as a whole, we had a positive cash flow of EUR 138 million. This positive cash flow is clear evidence that we are managing challenging times. We have a solid balance sheet and a strong liquidity base. We are increasingly combining our financing and sustainability strategies. And by doing so, continue to focus on sustainable growth. On the 13th of April, we also published advanced KPIs with EUR 286 million for the predicted EBITDA, and we have, therefore, exceeded our estimates with the capital market. And that despite low demand in the first quarter. Thus, the first 3 months of 2023 were much more successful than we had imagined at the beginning of the year. Shareholders, we are in a very good position to deal with the current economic situation, and we are looking with confidence towards the future. And now back to Markus Steilemann.

[Interpreted] Thomas, thank you for your commentary. It means that 2023 will be another challenging year, ladies and gentlemen, but I'm sure that we will once again adeptly handle the challenges by pulling out all the stops to get through the current crisis and by systematically pursuing our strategy because it has clearly put us on the right track. What this means is that we are seizing the major opportunities associated with the global megatrend towards comprehensive sustainability. The world must become greener and smarter, safer and more livable. We, at Covestro, help achieve this by contributing what we do particularly well, highly sustainable, innovative plastics. They are tailored exactly to the needs of many key industries, and they are bundled in 2 segments: 1 being tailored plastics based on innovation and customized solutions. The other is the business with standard materials where cost efficiency is one of the focal points. I must emphasize that both business lines are very attractive and full of potential. This is because they address important global trends and the needs of many key industries, be it the energy industry, be it the mobility sector or the construction industry. They are all going through far-reaching transformations in their quest to become sustainable. For this, they need the right materials, materials that we provide in close consultation with our customers and continuously improve. It means that we are literally on course for sustainable growth. Let me give you a few examples to illustrate this. The energy industry. This sector is by far the largest source of greenhouse gases that are damaging the climate. And this alone is reason enough for the industry to make a rapid transformation away from fossil fuels, such as coal to renewable sources such as solar and wind. At the same time, many other sectors, including the chemical industry will need more power in the future, and this will also have to be green but renewable energy is still not cost-effective enough to compete with fossil fuels. This is where our products and solutions come in. For wind turbines, for example, we have developed a polyurethane infusion resin that can be used to make rotor blades lighter, longer and stronger and to increase yields and their production is becoming more efficient at the same time. As a result, the production costs of rotor blades have declined by 8%. Electricity production costs would fall by 2.4% in total if Covestro materials were used. This harbors major potential for manufacturers of wind turbines and operators of wind farms. Ladies and gentlemen, our products are not only driving the energy revolution but are also supporting the sea change in mobility. The future belongs to alternative drives, such as the electric motor. Here too, our materials are literally paving the way. Company's polycarbonates make electric vehicles lighter and, in turn, increase their range. And they are extremely useful in battery cases and charging stations, making them safe, robust and cost effective. Apart from electric drives, we also have an eye on other major mobility topics. The trend towards autonomous driving is one example that can offer countless advantages such as greater safety and comfort. What's more, there is an increasing desire for individualization, which is also reflected in mobility. To this end, we are developing innovative materials and concepts for functioning fully networked vehicle interiors. Ladies and gentlemen, shareholders, another very topical example of sustainable growth comes from the area of packaging. As you know, there are clear regulations, especially in Europe relating to the huge amounts of packaging waste and the negative consequences this has on the environment. To deal with this, much more waste will have to be recycled. To date, this has worked best when paper is used as the packaging material. For this purpose, it has to be treated first, for example, to prevent it from letting moisture penetrate. Here, our company also offers suitable products. We have developed a special coating resin, which gives the paper, the properties of plastic so that it keeps moisture out, for example. What makes it so special is that it can still be recycled as paper. Our innovative material is particularly sustainable for 2 reasons. It contributes not only to closing material loops in the packaging industry, but is itself manufactured according to circular economic principles from raw materials that are in part plant-based. Ladies and gentlemen, I want to touch on another key sector that needs our materials in order to become more sustainable. I'm referring to the Construction industry, which is responsible for around 20% of global greenhouse gas emissions. It is, therefore, understandable that only climate-neutral buildings are to be built in the EU in the future. At the same time, millions of existing apartments and houses will require energy-efficient refurbishments. This will drive up demand for efficient insulation. This is because well insulated buildings release little heat and keep the cold outside. Rigid polyurethane foam is a particularly good insulant. We had Covestro supply the main components for it, including the substance MDI. My dear shareholders, we therefore expect demand for MDI to increase. We are getting ready by ramping up our production capacities at our site in Tarragona, Spain. We commissioned a new large-scale plant where MDI is produced in a particularly environmentally friendly way a week ago. This is achieved using a special technology that Covestro has developed together with a partner company. I now want to come back to chlorine. We need chlorine for MDI and our innovative technology allows us to produce it, using 25% less electricity. This means, in turn, that the new plant in Spain will avoid up to 22,000 metric tons of carbon dioxide emissions per year. So as you can see, ladies and gentlemen, we continue to invest in our production network in these challenging and uncertain times, including at our site in Map Ta Phut in Thailand. We recently held the groundbreaking ceremony for a new plant there, which will produce specialty films from polycarbonate. They're used above all in ID documents, car displays and electronic devices. And there is increasing demand for them in the Asia Pacific region. The materials for these films are in part based on organic waste. Alternative raw materials and energy saving production are only 2 examples of the extent to which we focus on sustainability internally as well. Here, we have set ourselves new ambitious goals in 2022. We want to make Covestro's operations climate neutral by as early as 2035. This means that by then greenhouse gas emissions from our own production and from purchased energy are to amount to net zero. We took a step in this direction. We reduced our emissions of CO2 equivalents by around 10% last year. At the same time, we continue to make progress in the transition to renewable energy. It now accounts for 12% of our total power consumption. Our target for this year is up to 18%. We are achieving this above all by negotiating direct agreements with energy suppliers at our Shanghai site China. We, for example, are already able to meet around 30% of our annual electricity demand with wind and solar energy. Moreover Shanghai and all other major sites around the world have now attained certification under the important internationally recognized ISCC plus standards. This is a central requirement or what is referred to as mass balancing. This is an arithmetic system for attributing recycled and bio-based raw materials to end products. It is similar to the familiar principle of working out the proportion of green electricity from the grid. This will allow us to drive our largest project, the circular economy, with which we are aligning the entire company. My dear shareholders, first becoming fully circular is the key to solving many global challenges. Circularity will help humanity conserve the earth's dwindling resources, protect the environment and achieve climate neutrality. At the same time, new ways of creating value are being uncovered which combines sustainability and growth. At Covestro, we have, therefore, committed ourselves wholeheartedly to the circular economy. Something like this cannot, of course, be done overnight at the push of a button. We're just at the beginning of a long journey, but we have already taken a number of promising steps, and we will rigorously stay the course until we have turned our vision into reality. However, the transition to the circular economy is not a project that can be completed in isolation. What we need is the comprehensive transformation of society as a whole. The economy must and will change. And we as consumers must adapt our behavior. Product labels can also help raise awareness of the circular economy in the general population. They will create acceptance and trust. Covestro, therefore, introduced a label in 2022 that identifies circular materials and technologies. The new label is called CQ, derived from circular intelligence. We use it to identify products that contain a minimum of 25% alternative raw materials. In the same way as the label for organic products and supermarkets, they now also give our customers a choice. Ladies and gentlemen, the use of nonfossil fuels is one of the pillars of the circular economy. The other is recycling products and waste. Let me illustrate how important it is to recycle using an everyday product that I presume all of you have at home, mattresses. In Europe, around 40 million of them are discarded every year. If you lay them next to each other, they would cover the circumference of the earth twice. These 40 million mattresses normally end up in waste incineration plants or landfills. Even though old mattresses are nothing other than a valuable raw material for new ones. Recycle mattresses rather than let them go to waste. That too is one of our aims at Covestro, ladies and gentlemen. To be more precise, it's about what's inside the foam under the cover, which makes the mattress comfortable. This foam is often made of polyurethane, a versatile material for which we produce and continually improve the key components. Polyurethane has many advantages, but also one drawback. It can't be recycled or at least not so far. But this is changing. We've also got off to a successful start in this area. Together with partners, we have developed innovative technology for recovering both core raw materials. We're doing it through a chemical process by breaking the foam down into its molecules, which can then be used to produce new foam and new mattresses. The framework for this groundbreaking project is provided by Evocycle CQ, our program for innovative recycling. As part of this process, we want to advance chemical recycling, as I've just mentioned. That is a new way approach for which we, therefore, need the right conditions. Ladies and gentlemen, another promising approach to taking the circular economy forward is microscopic but can have a huge effect. I'm referring to industrial biotechnology, which involves the use of microorganisms and enzymes, a topic of the future that is also the focus of research and development at Covestro. In the past year, we intensified our biotechnology activities, and established a dedicated research group. Here, experts are working on using enzymes specifically for plastic recycling. In addition, the enzymes are intended to help treat wastewater and break plastic waste down fully in the natural environment. Biotechnology has already helped us achieve a breakthrough. We can use this technology to produce the chemical aniline entirely from plants. We need aniline to produce MDI. The key insulant component I spoke about earlier, as you might recall. And with insulants, we in turn address the mega topic of sustainable building. And so we've come full circle. Having said that, ladies and gentlemen, I'm coming to the end of my presentation. Let me summarize. Stability, our sustainable future strategy and the solid balance sheet give us a firm foundation even in challenging times. Sustainable growth. We're gearing our business systematically towards areas of the future, such as sustainable building, new forms of mobility and renewable energy. Circular economy. We're forging ahead to make circularity a global guiding principle as a key to solving many of the challenges we face both now and in the future. So our company is on the right track. We stand firm, we create value, and we produce benefits. Thank you for your attention.

Ladies and gentlemen, on behalf of the Supervisory Board and on your behalf as well, I would like to thank the Board of Management and all of the employees for their hard work. Under extremely difficult situations, they have all shown a great deal of dedication. And I would like to say this on behalf of the Supervisory Board. You have taken important decisions and measures have been introduced to get Covestro through these difficult times. At the same time, you have also talked to us and kept us on course so that you can consider the long-term trends and lead to sustainability. Ladies and gentlemen, before we turn to the Supervisory Board report, I'd like to give you information on the attendance figures. The capital stock amounting to EUR 192,200,000 (sic) [ EUR 193,200,000 ] divided up into 193,200,000 shares. We see that 122,462,427 shares with exactly the same number of votes are represented here today, that is 63.39% of the registered share capital. In addition, we also have 525,890 absentee ballots. So this gives us a total of 122,988,317 shares overall. This is 63.66% of the share capital. Ladies and gentlemen, I'd now like to turn to the Supervisory Board's report. You will find this report on Pages 19 to 27 in the annual report, which I'd like to refer you to. We have reported in detail there, so I will be somewhat briefer today as a result. As we've mentioned a number of times already, the past year was characterized by the energy crisis and a downswing in the global economy. The coronavirus pandemic also had negative impacts on our business in the first half of the year. Lockdowns in China led to logistics problems and disruptions in the supply chain. In these critical times, the Board of management took the necessary decisions in order to maintain business and in order to maintain the viability of our company. This also included securing our liquidity and our profitability. At the same time, Covestro continued its path towards circular economy and also entered onto a path towards climate neutrality which is to be achieved by 2035. We have supported the Supervisory Board very closely and support their decisions. In February of this year, we accepted the request made from our CTO, Dr. Toepfer to terminate his contract. He will be leaving Covestro on the 31st of August 2023, and he'll take on the same role at the European aircraft manufacturer, Airbus. Up until then, Dr. Toepfer will continue his work as CFO and Labor Director, and he will continue to show complete dedication. The Supervisory Board has introduced its search for his successor and will make an announcement at the appropriate point in time. Mr. Toepfer, at this point, I would like to thank you for your great amount of commitment to our company. We regret the fact that you are leaving and would like to wish you all the very best in the future. Ladies and gentlemen, when it comes to personnel matters, I'd also like to announce that there was some important changes in the past fiscal year for continuity in management. The contract for our CEO was extended ahead of time by 5 years. So once again, congratulations, Mr. Steilemann, and the contract for our CTO for Dr. Klaus Schafer was extended due to the difficult situation on the energy market was extended by 6 months. His successor, Thorsten Dreier, will take on this office in July. He is now Head of the Business Entity Coatings and Adhesives at Covestro. Dr. Schafer, we, too, would like to thank you for your many years of service to our company and its predecessors. You have had a number of roles and have made a major contribution towards Covestro's success. Mr. Schafer, we wish you all the very best for the new phase in your life. We would also like to wish you, Mr. Dreier all the very best. You have enriched our company for many years with your technological expertise, customer focus, market orientation and management qualities. We on the Supervisory Board, are convinced that you, as CTO, are an excellent person for this job. Ladies and gentlemen, Dr. Dreier will be working together with Dr. Schafer before taking over his activity, and he is becoming familiar with all of his new tasks. And we are convinced on the Supervisory Board that Dr. Dreier will also drive Covestro's transformation towards circular economy and climate neutrality together with the other members of the Board of Management. But let's let Dr. Dreier introduce himself very briefly.

[Interpreted] Dear shareholders, my name is Thorsten Dreier. And as of the 1st of July, I will become CTO at Covestro. I am very much looking forward to introducing myself to you today. I see myself as someone who's always been with Covestro after studying chemistry and getting my PhD in Munster, I began as a Lab Director in polyurethane at Bayer. And in the past 2 decades, I have seen a lot of different areas at Covestro, R&D, et cetera, up until the business. I have seen -- worked with many international teams, and I'm very much associated with the people who work here. I am now responsible for Coatings & Adhesives business entity. Before that, I worked in production for many years. And that is why this new challenge feels sort of like coming back home and I believe in Covestro's vision, and I'm convinced that we can improve the world with our products. With my experience and expertise, I would like to make a contribution to driving Covestro's transformation and to making Covestro a climate neutral area. Now let me say a few words about myself. I'm not only someone who prolongs to Covestro, but I live here in North Rhine-Westphalia. I live with my wife and daughter in Dusseldorf. I was born in Germany and in the very beginning I was with -- I played soccer for [indiscernible]. And then I began my career in the chemical industry, and that was an excellent decision.

Ladies and gentlemen, not only on the Board of Management, we also had some changes in the Supervisory Board as well. At last year's AGM, Dr. Sven Schneider was elected as representative of the shareholders. He was the successor to Dr. Rolf Nonnenmacher on the Supervisory Board. He was then elected to the Audit Committee, and he then assumed the Chair of the Audit Committee. And then at the end of the last AGM, both employee representatives, Christoph Gurtler and Frank Lollgen were joined the Supervisory Board to succeed Dr. Ulrich Liman and Frank Werth. All 3 new members were introduced to you at the last AGM. They have supported Supervisory Board's work in very challenging past fiscal year. The entire Supervisory Board was in regular dialogue with the Board of Management. We were convinced of the decisions and measures introduced by management. And at the same time, we also monitored the work of the supervisory -- of the Management Board on an ongoing basis. This was primarily at the 6 meetings of the Supervisory Board where all members of the Supervisory Board were present. One member could not attend 1 single meeting for personal reasons. But it was possible for him to support the resolution at this meeting as a result of a pre-briefing and was able to submit his vote by mail. Another Supervisory Board meeting, he could not take part in the last -- in the 2 meetings of the second half of the year for health reasons. The Supervisory Board focused on the following topics in the past year. The current crisis situation with respect to the Russian war against Ukraine and its impact on the company. This was the subject matter of all of the Supervisory Board meetings in 2022. We also had a number of additional reports from the Board of Management outside the Supervisory Board meetings. Also the continued transformation of the group and the integration of the business entity resins and functional materials acquired from DSM in 2021. These were topics that we dealt with in nearly all of our Supervisory Board meetings. On the Supervisory Board, we received detailed reports from the Board of Management on these topics. We then also dealt in detail with the existing challenges and progress that had been made. We also reviewed the assumptions and discussed them with the Board of Management. At the first meeting of the year end review in February, we dealt in detail with the annual and consolidated financial statements for fiscal '21. With the audit report and the auditor report from the external auditor as well as the proposal on the use of the distributed product. Other topics with the risk situation as well as the path toward climate neutrality presented by the Board of Management. This is something that we agreed to, including the associated targets for emission reductions. The Supervisory Board on the 21st of April, the same day as the virtual AGM. That was the focus of that meeting. Following the AGM, we then had a constituent meeting of the Supervisory Board so that the 6 new members of the Supervisory Board that had been elected in March for the employee representatives. The same applied to the representatives of the shareholder representative, Dr. Sven Schneider. Petra Kronen was elected Deputy Supervisory Board Chair and the members from the employee representatives were elected to the Supervisory Board committees. Dr. Sven Schneider elected by the AGM to the Supervisory Board was elected to be a member of the Audit Committee and then to be the Audit Committee's Chair. Ladies and gentlemen, let's continue going through the year. At our meeting in June, the Supervisory Board dealt in detail with the self-assessment of the effectivity and efficiency of the Supervisory Board's activities. This was supported from an external expert. Other topics were the agenda quota on the Board of Management and Supervisory Board and also the recent changes to the German Corporate Governance Code. The Supervisory Board, as I said before, also supported the decision to reappoint and extend contract for the CEO, Dr. Steilemann for another 5 years after the end of his current appointment. From July till early October, the Supervisory Board dealt with 4 time critical topics and decisions during -- using the written procedure. On the 29th of July, they dealt with the sale of Additive Manufacturing at Covestro. On the 4th of August, they also agreed to an increase in the funding as well as on the 25th, they also agreed to euro commercial paper as well as the issuing of a promissory note loan. On the 4th of October, they decided to extend Dr. Schafer's term of office for another 6 months. At the Supervisory Board meeting on the 9th and 10th of November, the Supervisory Board decided to appoint Dr. Dreier as Dr. Schafer's successor. The fall meeting of the Supervisory Board is our so-called strategy meeting. It is accompanied by a strategy workshop beforehand which is organized by the Board of Management. The focus of this strategy -- of the strategy meeting was also the group strategy, the short-, medium- and long-term trends as well as the challenges and also [ strategical living ]. In December, we dealt with compensation issues, and this includes a review of the fixed compensation for the Board of Management as well as their long-term variable compensation. Another regular topic at the last Supervisory Board meeting of the year is dealing with the corporate planning proposed by the Board of Management for the next fiscal year. So in this case, it was for 2023 as well as the medium-term outlook. The Supervisory Board approved both the corporate planning as well as the funding frame for fiscal 2023. At this meeting, we also dealt with plans for today's AGM. The agenda as well as the draft resolutions, we also agreed to the decision of the Board of Management to conduct today's meeting virtually. There was a regular exchange between the CEO and myself between our meetings, especially with regard to questions of strategy and planning, business development and upcoming decisions. Members of the Supervisory Board, also are very much committed to their own continuing education despite the challenges considered due to the coronavirus pandemic as well as some of the restrictions regarding in-person meetings and travel restrictions. This was particularly in the form of the full day strategy workshop in November in conjunction with the Supervisory Board's strategy meeting. In conjunction with the effectiveness and efficiency assessments supported by an external expert, we also had a 2-day workshop for the Supervisory Board, moderated by someone from the outside. The special roles and tasks of the Supervisory Board will discuss against the backdrop of the current crisis situation, the Russian war against Ukraine, and energy crisis. In October, we made use of a visit to the plastics fair K2022 in Dusseldorf to learn more about the plastics industry and current trends and challenges. We focused here on sustainability and circular economy. In November, there was also a training course supported by external experts with regard to capital market questions and capital market law. Ladies and gentlemen, I'd now like to refer briefly to the activities of the Supervisory Board committees. The work of the Supervisory Board is prepared and continued by the committee. The committees met as follows during the period under review. The Presidial Committee once, Audit Committee 4 times, HR Committee 5 times, Nomination Committee once, and Sustainable Committee 5 times. At all of these meetings, all the members participated with the exception of 1 Supervisory Board member who fell ill in the second half of the year. A number of Supervisory Board members also participated in committee meetings, especially at the meetings of the Sustainability Committee which explicitly opened its door to guests from the full Supervisory Board. The Audit Committee also monitored the accounting process as well as the effectiveness of the internal control system and the risk management system. They were informed on an ongoing basis with regard to developments in the compliance management system as well as risk assessment. The Audit Committee also had continuous discussions with the external auditor with regard to major audit risks and also the orientation for the audit. Special topics for the Audit Committee included current and future regulatory requirements to the sustainability report and its implementation, changes to the German Corporate Governance Code, asset management for the pension assets as well as information security and cyber risk management. The HR committee dealt with achievement of goals by the Board of Management members and compensation. We also discussed the reappointment and extension of the contract to the CEO, Dr. Steilemann as well as the successor planning for CTO, Dr. Schäfer. An important topic for the Nomination Committee this year, of course, was the skills profile for the Supervisory Board. This was reviewed and supplemented in order to meet the requirements of the new version of the German Corporate Governance Code. The nominee committee also prepared the qualification metrics required by the code, which was then dealt with by the Presidial Committee. The Presidial Committee had a meeting in order to deal with continuing its work on the qualification metrics as well as preparing the decision in the Supervisory Board. The Sustainability Committee dealt with Covestro's climate program, the path towards climate neutrality, including the proposals for target setting and implementation measures for the Scope 1 and Scope 2 emissions. This means greenhouse gas emissions, which generated from our own production or from purchased energy. Over the course of the year, the Sustainability Committee also dealt with Scope 3 emissions. In other words, the emission of greenhouse gases from purchased raw materials as well as other up and downstream processes in the added value chain. Here, we're talking about circular economy as well as the EU chemical strategy as well as the approach taken thereon by Covestro. Other topics for the Sustainability Committee included assessment of external rating agencies with regard to ESG, environment, social affairs and governance as well as the approach taken here by Covestro. The ESG aspect abiding by human rights as well as transparent reporting. I'd now like to come back briefly to the Audit Committee. Here, we had a regular exchange between the Chairman of the Audit Committee. At the beginning of the year, this was Dr. Nonnenmacher then Dr. Schneider and our CFO, Dr. Toepfer in order to discuss the risk and compliance system as well as the accounting process at Covestro. The Audit Committee and Supervisory Board, then received the financial statements and the combined management report, which all received an unqualified audit opinion as well as the audit report from the external auditors. With these financial statements and also the assessment as to the further development of the company is something that we have agreed with. As in the past, I'm convinced that the excellent cooperation between Board of Management and Supervisory Board. We have close, transparent and trustworthy cooperation. What is most important to us here is the principles of good corporate governance. Ladies and gentlemen, so that concludes my report on the Supervisory Board. At this point, I would like to say a few words on the compensation report and the adjusted compensation system for the members of the Board of Management. You will be voting on that under agenda items 5 and 6. Let's begin with the compensation system. Our compensation system for Covestro AG's Board of Management members is something that the AGM voted on last year. And approved this with a majority of 88.75%. This system is to continue essentially for the future. That is why the Supervisory Board has not decided on any fundamental change. They simply want to adjust the existing system with a -- adjustment as of the 1st of January 2023. With the adjusted system, it's not only for short term but also for the long-term variable compensation component, you will have the possibility to adjust the payout percent should there be any unforeseeable developments. This provisor will be applied for the first time for the performance period from the 1st of January 2023 until the 31st of December 2026. Supervisory Board has also done away with the mobility lump-sum for new Executive Board members as well as the reimbursement of costs for an annual health check. The Supervisory Board has also implemented the possibility in the compensation system for 2022, which allows us to add additional criteria to the sustainability component. This possibility for the long-term variable compensation as of 2023 can include indirect greenhouse gas. I mentioned Scope 2 was then included in the compensation system and has been included in the presentation of the long-term variable compensation. As in the past and even more so for our justice system, the following will apply. The system is based on the corporate strategy and it should also make a contribution towards sustainable corporate success and to achieving strategic corporate targets. We want to ensure Covestro's attractiveness amongst competitors and also attract highly qualified managers, guarantee high transparency and also be in line with legal and regulatory requirements. Compensation for the Board of Management includes not only performance, non-related components, but also question of variable and multiyear performance-related compensation criteria. The focus of the overall compensation is thus based on long-term sustainable corporate development. In accordance with the responsibility taken by the Board of Management within our model, we are one. We see that all of the Board of managements have the same KPIs in their variable compensation. The link to economic success will guarantee any fluctuation in variable compensation if the targets are over exceeded or missed. Compensation for the Board of Management is in line with the basic principle of the compensation structure at the Covestro Group and this applies for the Board of Management as well as managers and senior executives. They all have the same structure. Ladies and gentlemen, now I'd like to give you a few comments on our compensation report for fiscal '22. This is something that we will be dealing with under agenda Item 5. The Board of Management and Supervisory Board have printed the compensation report. You can find it in the notice to this meeting following the agenda. You will also see the audit opinion by our external auditors, KPMG. The auditors was also mandated to review the contents of the compensation report for fiscal '22. This review is also taken into account in the audit opinion. Ladies and gentlemen, in our written compensation report, you will also see that when the -- at that point in time, the report was still being reviewed to see if and to what extent Covestro would be applying for relief with regard to the loss to keep the prices down for electricity and natural gas and heat. These laws provide for rules regarding bonuses as well as dividends as of certain relief amounts. So the members of the Board of management agreed that certain vested variable compensation components would be shifted at least until April of 2023. Meanwhile, Covestro has decided that they will apply for relief under these laws to keep the prices down. And this would be not to exceed the threshold of EUR 25 million. This means that neither bonus payments nor dividends are banned. Neither of them are banned. Ladies and gentlemen, that brings us now to the discussions, and I have already explained the formalities to you in the past. Please use the respective button in the main menu of the Investor Portal if you would like to request to speak. After submitting a request to speak, you will be added to our list of speakers. Registered speakers will be allocated into groups of probably 5 people. Once they have been called on by me, the debate will be interrupted for around 5 minutes to be able to do a quick technical test with the respective speakers. Subsequently, I will then call upon the first 5 people, one after another for them to connect live with us and with their co-shareholders via video and give them the opportunity to voice their questions and any motions they may have. Please, if possible, submit any of the remarks or questions you might have in one fell through. We will take note of the questions and then collect them for them to be answered. After each group, we will then have a round of answers where the members of the Board of management will refer to these questions, and questions which refer to the area of responsibility of the Supervisory Board will be answered by me assuming that the Board of Management consents. If we still have any open or unanswered questions or requests to speak, we will have a further round of questions until all questions have been answered. I would like to ask you again to please be as brief as possible and try not to exceed 10 minutes. However, there is no formal limitation on length of questions or speaking, but I do reserve the right to limit speakers time if I believe this is necessary for the further cause of the debate. I would just like to also point out the following after the debate and after your questions have been answered, we will begin with the voting procedure. Via our Investor Portal, you can still grant proxies, and instructions until the beginning of the voting procedure, and you can also change or revoke any proxies or instructions you may have issued. You will also be able to submit postal votes until the end of the voting procedure. And at due time, I will tell you before those functions are deactivated to then be able to calculate the results of the voting. Ladies and gentlemen, we shall now begin with the debate. We already have a number of requests to speak. And first speakers are Mr. [ Andreas Masic ] ; Mr. [ Frederic Beckendoff; ] Mr. [ Arne Autenbecg ]; Mr. Alejandro [indiscernible] and Mr. [ Olvi Steva ] . Our technical team would like to ask you and would like to ask these 5 people who I have just named to join them for the technical test in the Investor Portal that will take around 5 minutes. Therefore, the AGM is interrupted for probably around 5 minutes Thereafter, we shall continue with the first speakers. [Break]

Ladies and gentlemen, I would just like to let you know that the technical check for the first speakers will still take a little longer. So I would like to ask for your patience. We will resume the AGM as soon as possible. [Break]

[Interpreted] Ladies and gentlemen, you will have noticed that our technical check took a little longer than we initially thought it would. We please ask your understanding and ask you to accept our apologies. That brings us to the first speaker. But before we do that, I would just like to outline the following procedure. You still have the opportunity and the possibility to request to speak via the investor portal and the respective button there. And we will still continue to just divide you into groups. Our technical team will then contact the respective group of speakers for the technical check. When the respective speakers are activated in the live stream, we will have to use a slightly different method than we originally thought. The respective speaker will be sent an individual link by our technical team. And after I have called their name, they will be able to join the virtual AGM live. So in practical terms, nothing changes for you as a speaker. So just to reiterate, please accept our apologies for the long wait. As you can see, the Supervisory Board is also still present. Our first speaker Mr. Andreas [indiscernible], the floor is yours.

[Interpreted] Thank you very much, Mr. Potts. It's a very exciting AGM. I feel like a bit of a pioneer at this virtual AGM. My name is Andreas [indiscernible]. I am the spokesperson of the SDK Association. And I'm sure shareholders are familiar with our Association. We represent private shareholders and institutional investors at around 500 AGMs. Now I would like to come to the report. Now the dividend policy has set out a 35% to 55% of the Group income to be paid out as dividend. Now Mr. [indiscernible] explained that in 2022, we had solid liquidity with an excess of cash flow. Now would that not be enough of a reason to at least pay out a minimum dividend and then look at adjusting -- the compensation policy to then allow for a dividend for our shareholders? It would be very interested to hear what you have to say about this. Now depreciation led to changes in the Group earnings in the estimated. So please, could you explain what these depreciations were? So now in your presentation for 2022, mentioned was made of an unfavorable tax situation. Is that why -- are changes to the tax policy of the corporation, perhaps envisage and I would also be interested to know how the Board of Management intends to adapt to changes in energy prices in the various regions. Now at the moment, there is a share repurchase plan. And I would like to know what the further plan is in this regard. Regarding the risk assessment on a number of legal risks mentioned, which current legal risks are seen in the [indiscernible] pipeline and the U.S.A. and the supply chain law there with a potential high fines? I would also be interested to know how many people are currently present at the AGM. I would like to explain how the SDK intends to vote today. Now we have the ratification of the actions of the Board of Management and certain matters that are not in the -- at the [indiscernible] of the board of management, such as the Ukraine conflict and the energy price problems and supply chains have -- which have led to certain situations and circumstances. Now the SDK is of the belief that the Board of Management has nevertheless managed to steer the company through these difficult times and has led to good growth in this time. A clear forecast for the ongoing year would, however, be desirable. It is normal to have a long-term framework agreements with customers and suppliers. Usually, this is using some sort of software. That's why I can't quite follow why it's not possible to provide a forecast for the ongoing financial year. This brings me to item 3, the ratification of the members of the Supervisory Board. And according to the detailed report 95% -- 96.5% of the members took part in the Supervisory Board meetings. And the year-end financial statements were audited and approved. And the German corporate governance code regulations were focused on by the shareholders and is referred to Paragraph 171 of the Stock Corporation Act. And we believe that the Supervisory Board fulfilled all of their obligations. KPMG, this is item 4. KPMG was mandated as the annual auditor, and we're talking about a reporting period of EUR 3.6 million. Now the SDK would appeal for a complete division of auditing and consultancy to ensure neutral objective auditing, free from commercial interest. But in the present case, we can accept this KPMG does indeed fulfill the criteria required by the SDK for annual auditing. The approval of the compensation report, now this was formally audited by KPMG in accordance with Paragraph 162 of the Stock Corporation. And therefore, we assume that this report is correct and complete. Agenda, Item 6, approval of the compensation system for the members of the Board of Management. Again, here, I agree, the compensation system is suitable in the -- in regard of payment for performance in the reporting period. We just heard that due to the negative annual earnings 2022, the Board of Management remuneration decreased by more than half year-on-year. And the draft resolution seeks to supplement the adjustment for unpredictable incidents. And the mobility lump sum is going to be renounced and withdrawn and the SDK has no [indiscernible]. I would, however, like to know just the case of understanding, what exactly is meant by an unforeseeable event or unforeseeable incident? That brings me now to Agenda point 7, the decision regarding the supplement of clause 13 of the articles of incorporation regarding the power of the Board of management to hold the AGM as a virtual AGM or we vehemently object to this. The AGM is the only opportunity for shareholders to exchange opinions directly with the management and other shareholders to influence a corporate policy of a company that is a very precious, good in the mind of the SDK. And that is why at least at least are in person, AGM should be held ideally a hybrid AGM to give the opportunity for those people to attend as they wish. Now a regulation in the Articles of Incorporation to introduce a virtual AGM can only be agreed with in the event of a crisis situation and such a crisis situation is only seem to be given if government regulations force this. And therefore, a purely virtual AGM must be objected to, only in emergency situations could ratify this. And in 2024, a purely virtual AGM has been envisaged. Is that the case? Please tell us. Clearly, yes. Then Agenda Item 8, resolution about the adaptation of Item 16, Paragraph 4 of the article's incorporation regarding the possibility for Supervisory Board members to participate in virtual AGMs virtually. Again, we object to this. As per Agenda Item 7, we believe that people should be present in person. Ladies and gentlemen, that was what I have to say. I hope the shareholders concur with the SDKs proposals. And thank you very much for your attention.

[Interpreted] Thank you very much, Mr. [indiscernible], for your remarks and for all your comments. Our next speaker Mr. [indiscernible].

[Interpreted] Thank you, Dr. Potts. Ladies and gentlemen, my name is [indiscernible]. I'm a spokesperson of the DSW and we represent those shareholders who gave us the -- their proxies. Now first of all, I would like to express my regret that today's AGM is being held as a virtual AGM despite the fact that there are no longer any COVID restrictions. We expressly regret the fact that there is no direct exchange between the company and shareholders. And personal dialogue is not possible as we see. We believe this is a very important matter. Dr. Steilemann, unfortunately, I cannot agree with one point that you said. Now participation in a virtual AGM cannot be equated to being at an AGM in person. I believe that this is a little farfetched to claim. Now I know that lots of people have been advocating very strongly for virtual AGMs. Why are we not able to have a hybrid AGM today? Now the reasoning for a virtual AGM today were alluded to by you, Mr. Pott. But I would just like to ask how many people are currently participating in the virtual AGM? And how does this compare to the last in-person AGM of 2019? And how many people are dialed in from abroad? How much has the virtual AGM cost today? And what is the comparison to an in-person AGM? What -- how much CO2 -- how many CO2 emissions have been saved by not having an in-person AGM today? Now we've had some technical problems today. And that has certainly reinforced our critical position regarding this, and we, therefore, appeal to preferably having an in-person agent. We would be very interested to know what caused the technical problems and know if you would be able to rule them out in the future. Ladies and gentlemen, fiscal year 2022 was for Covestro due to many of the external factors, very challenging. And you've alluded to these factors. Despite a record level of group turnover, the operational -- operating profits and operating cash flow have decreased, operating cash flow by minus 90%. Now due to deferred tax assets, we have now posted a loss in the company. So we would be interested to know what has led to this and what measures have been taken. Do the depreciations refer to RFM as acquired from DSM in 2021? And have there been any other depreciations? What headroom do you see in the various units? And under which circumstances do you think there could be a recovery in the midterm of the losses made this year in this last fiscal year? For the shareholders, fiscal year 2022 was bad as well, not least because of the lack of a dividend. And it doesn't seem that there's going to be much improvement in 2023. Now 2022, according to the dividend policy was going to see a dividend payout of 35% to 55% of the group earnings. Now, we can understand why a dividend is not paid out due to the losses. Nevertheless, we still wonder whether the measures taken were correct, whether the correct calculations have been applied. There have been quite some fluctuation in the payment of dividends in the chemical industries. What are your further considerations regarding dividend policy? Perhaps there could be a better basis for calculation based on operating -- free cash flow. Now we're talking about minus 27% of fiscal 2022, which is considerably worse than competitors. We have only a slight improvement over -- on the share index year-on-year. With a volume of 150 million, it seems that the share buyback problem has been discontinued. So one share is also seen often as the third best option for the best use of liquidity. And we also talk about investments in the business or pay out in the form of a dividend. So do you plan to reestablish this program, or would it be more consistent to just discontinue it? What about the implementation of the buyback program? Dr. Steilemann, you talked about Covestro's prospects as well as producing for the markets and also to be structural leadership when it comes to changing from gas. And when we talk about the increase in cost when it comes to competitiveness in European sites, do you see a real risk of a deindustrialization in Germany? DSL also talked about closing a plant in Ludwigshafen and that they would be doing away with 100 jobs. So the same thing happened here, or will we be talking about a loss of competitors and higher production costs? What about the capacity utilization at Covestro? How -- what is the share of plants which are in operation? You produce chlorine, you mentioned that. In 2022, we saw that we also had to discontinue chlorine production in [indiscernible], also the reduction of polycarbonate and TDI. What are the reasons for this, and what are the impacts of this loss in production? In November 2022, you announced that in [indiscernible], you would be taking investments for a world scale planned for MDA, EUR 1.5 billion and that you would reassess this and do so at a later point in time. You are going to have the plant in the United States, and this is also something that's being reassessed. What is the current status? What do you think is the future of the chemicals industry in the United States? Or is it in China? In the U.S. and in China, or in China? What about the production landscape? What will be the geographic distribution in several years' time? Most of your comments, Dr. Steilemann focused on sustainability and circular economy. What about the past year? You were also very active, and you were pioneers. In 2022, we see there are new and more ambitious targets when it comes to greenhouse gas emissions, so that you can be climate neutral by 2035 as well as a [indiscernible] for up and downstream processes as well. Covestro is not yet part of the Science-Based Target initiative such as other companies, for example, Lanxess. What about SBTi? How do you see that? Are you going to commit this? Are you going to commit to Science-Based Climate targets in order to reduce or limit climate warming to 1.5 degrees? Covestro is focusing on circular economy. In the medium and long-term environment, they want to offer a climate-neutral situation. We also have to talk about further identification of circularity in order to have KPIs and to define the targets. And these indicators include a share of alternative fuels in production and the share of circular solutions in the entire portfolio. Could you give us these figures for 2021 and 2022? If these can be calculated, how -- what were they? Now let's come back to today's agenda. Agenda item 6, we're going to be approving an adjusted compensation system for the Board of management. Up until now, this was something that was planned for 2021 and 2022. What was the main reason why the supervisory believe that this system needed to be amended yet again? What are the requirements here? Will we be able to adjust the payout percentage for the long-term variable of their compensation? Maybe the Supervisory Board could have also considered 2019 to 2022. It could have been adjusted, assuming that this tranche would also have included a CO2 factor. For fiscal 2023 when it comes to the long-term variable beginning in that year, CO2 has also included indirect CO2 emissions. What about the targets for reducing CO2 emissions in the short and long-term compensation? What about the risk of a unilateral incentive if savings lead to a higher target achievement when it comes, both to STI and LTI? Here, we also have variable compensation. How can these be extended? Let's come to the elephant in the virtual room when it comes to the Agenda item #7. In today's virtual AGM, we also have not asked the following question. And this is very -- you said it's very close to an in-person AGM. The criteria for your decision to hold a virtual meeting today, it seems to be not specific enough. We see that there -- we expect assurance from the company that in a virtual AGM, nothing will be focused on which would have any impact on the shareholders' rights, a domination agreement or any major changes to the articles of association. I'd also like to -- I won't be commenting anymore on that. Instead of that, I will then reject this Agenda item [indiscernible]. We will vote in favor of the others, however. So that brings us to the fiscal -- current fiscal year, our expressions for 2022. Unlike what you have said, you didn't say very much on this at all. Fiscal '23, you expect an EBITDA clearly below last year, clearly below the free operating cash flow and clearly [indiscernible] over WACC and a double-digit decline. In the past week, you commented on -- you published the figures for the first quarter, much better than expected at the beginning of the year. But you still will be showing a loss. What about the visibility after the first quarter? When we consider the first quarter, have things improved? When will you be able to make your forecast more specific? Do you assume that in fiscal '23 that you will have a balanced result? And what about your forecast for this year, EUR 2.8 billion, does that still continue? Dr. Steilemann, as Chairman of the Association of Chemical Industry, you have been very much in favor of lowering the cost for gas and electricity. You just talked about this in your compensation report in another context that you said you would be looking into a possibility of taking this. Dr. Pott also said something on this today. So my question is, what prices for electricity and gas are you basing this on? And what energy prices do you expect in the medium term? And at the present point in time, are you excluding the 20 -- going beyond the 20 -- are you ruling this out to go beyond the 25 million? Now to conclude my statement, I'd like to talk of the 2 members of the Board of management that are leaving, Mr. Schäfer and Mr. Toepfer. Thank you very much to both of you, who have shown a great deal of commitment to the company over the past years. I'd also like to thank all of the members of the Board as well as the employees who worked very hard in very difficult times. And I'd like to wish you all the very best for fiscal '23. Thank you very much for your attention.

[Interpreted] Thank you, Mr. [ Beckendorff ] for your commentary. The next speaker is Mr. [ Arne Rautenberg ]. Please, the floor is yours.

[ Unfortunately, the sound quality is so bad that the interpreters can't understand anything. ] [indiscernible] [Interpreted] This is down on the European chemicals sector, which posted a gain of 2% and much worse than the DAX, which posted a gain of 12% over the same period, Mr. Steilemann. Real adjustments have to be made, so that Covestro can extricate itself from this [ cost ]. Covestro is suffering under the substantial energy costs, which have risen to over EUR 2 billion. What is your position with respect to the long-term energy cost assumptions? And how would they affect the industrial plants in Germany? Mr. Steilemann, in the past, small cost saving programs were sufficient in order to buffer the cost increases, but this isn't going to be enough anymore. In view of the energy crisis in Europe, the times have changed considerably. We have seen competitors taking increasing numbers of measures. You also plan to follow suit in Covestro. We would welcome this very much. Mr. Steilemann, the Russian war of aggression demonstrates how quickly geopolitical nightmares can become reality. What are the opportunities and risks that you identify in China? How flexible is your China strategy? How quickly could you reduce dependency on China as a production site and a sales region? Ladies and gentlemen, as a sustainable investor, we look to ESG criteria. All economic players have an obligation by 2050 to be climate neutral, so that the global rise in temperature can be limited to below 2 degrees. Every company, including Covestro, won't be able to get around their responsibility for Scope 1 emissions, their own emissions that is, or emissions along the value chain. Without doing a lot to reduce Scope 1, 2 and 3 emissions, you won't be able to curb climate change. From 2025 onwards, therefore, we will no longer invest in CO2-intensive companies who refuse to publish long-term climate targets. This includes Scope 3 emissions on the basis of standardized calculation measures. Union investment will, therefore, increasingly look to ambitious targets of Covestro in terms of the climate, and we'll push for that. The chemical industry is one of the most energy-intensive sectors. Covestro has already announced substantial plans to reduce Scope 1 and Scope 2 emissions, but they haven't been validated externally. Why haven't you joined the Science-Based Targets initiative? I believe that this is necessary in order to increase the credibility of these ambitions. We would welcome this a lot. And what about your climate neutrality goals for Scope 3, when will you publish these? Ladies and gentlemen, this brings us to the agenda. We approve the acts of the Supervisory Board and the Board of management, but we're against the draft resolutions on Items 7 and 8. We are not in agreement with Item 8, because no detailed commentary has been provided in terms of the conditions under which the Board of management will avail itself of the possibility to hold a virtual AGM. On top of that, we haven't been told exactly how future AGMs will be held in detail. We are against Item 8, because the physical presence of members of the Supervisory Board is something we believe is essential to maintain the dialogue with the shareholders on the day of the AGM. We agree with all of the other items on the agenda. Ladies and gentlemen on the Board of management and Supervisory Board, as you can see from our tenor, we have a clear preference for in-person AGMs. Only then can you have a proper general debate. Only in such a format can the shareholders really reach the entire Board of management and Supervisory Board. You should be available to the shareholders at least once a year in person, so you can field questions. And in-person proceedings are essential for everyone to gain a feeling for the atmosphere. So we do recommend that you return to in-person proceedings in the future. Thank you so much for your attention.

[Interpreted] Well, Mr. [ Rautenberg ], thank you very much for your submission. The next speaker on my list Mr. Jimenez. Mr. Jimenez, please go ahead.

Yes. Hello. Thank you. So I will first ask the question in English, and then my colleague will translate to German. So hello, my name is Alejandro Jimenez. [indiscernible] asking a question today on behalf of [indiscernible]. [indiscernible] is a [indiscernible] investment platform businesses are about [indiscernible]. The question is also on behalf of ShareAction and [indiscernible]. The ShareAction is NGO that works to promote responsible investing and help companies reach sustainable goals. So this is the decisive decade for the 1.5-degree goal of the Paris Agreement.

The latest report from the IPCC, we affirmed that deep, rapid and sustained greenhouse gas emissions reductions can still limit global warming to 1.5 degrees. Avoiding the worst impacts of climate change. We applaud Covestro for its efforts to align with the 1.5 degrees. The company's aim to transition to 100% renewable energy and 100% renewable alternative raw materials are laudable. Covestro peers in the European chemical sector should follow this example. We would like to ask you about your plans to manage and I quote "possible residual emissions in the future." In your annual report, you said that you are evaluating the use of compensatory measures and things to address possible residual emissions in the future. As Covestro you're aware that trying to compensate for emissions in one area with reductions in another is a risky and possibly unreliable strategy to meet climate goals. So our question is, can Covestro explain what residual emissions you anticipate, what emissions compensation measures you are considering and how you will minimize your reliance on compensation measures as far as possible. Doug will move to Gimenez.

Hello. I'm Alejandro Gimenez. I am asking a question on behalf of [indiscernible] this is a sustainable investment platform and also on behalf of share action, shareholder association. We are currently in a decisive decade where the 1.5-degree centigrade of the Paris agreement has to be achieved. The most recent agreement of the ICC has emphasized that rapid and sustainable reduction of greenhouse gas emissions we'll still be able to limit global warming to 1.5-degrees centigrade in order to stave off the worst possible consequences of climate change. We welcome the efforts of Covestro to achieve the 1.5-degree target. On top of that, we are pleased about the goal of Covestro to increase their dependence on renewable energy and increase the quota of renewable energy and the energy mix. We believe that other players in Europe should follow suit. But we would like to know what Covestro's plans are to manage residual emissions in the future. In your annual report, you declared that Covestro is looking into compensation measures in order to prevent residual emissions in the future. Covestro should be aware that the attempt to compensate emissions in one area by reductions in another is a risky strategy and a strategy that is not reliable when it comes to achieving climate targets. Therefore, my question to you is can Covestro explain to us the residual emissions it anticipates, what measures it is considering to reduce emissions and how they intend to reduce their dependency on compensation measures to the extent possible.

Thank you Mr [indiscernible] for your submissions and your questions. The next speaker on my list is Mr. [indiscernible]

Chairman, ladies and gentlemen, I'm [indiscernible] I'm a private shareholder. [indiscernible] his presentation spoke of the fact that EUR 245 million in impairment losses have been recognized for losses carried forward. This is surprising to me because on Page 275 of your annual report, you write that all the deferred tax asset overhang are deemed to be maintaining their value. We're talking about more than EUR 200 million. And according to the annual report, these will expire after 5 years. Therefore, I can't understand why you arrive at a number of EUR 245 million in terms of value reductions. My second question relates to the difference on the asset side in terms of pension commitments it has dropped to EUR 5.9 million and possibly these differences on the asset side drop. They will have to be compensated for in the future. This means that we will be facing more burden. And perhaps you could explain to us or please actually do explain to us why these differences on the asset side have been reduced and how you intend to manage the situation in the future. My next question is directed to the rotor blade materials that you mentioned in your speech. You place great emphasis on sustainability and on recycling. And you also presented your project for recycling polycarbonates. The rotar blade, however, are made of composite fiber materials. And these composite fiber materials to date cannot be separated out from each other. And therefore, they are classified as hazardous waste and are harmful for the environment. I don't understand, therefore, how you can speak about sustainability and recycling while thousands of tons of rotor blades will go out of service and that material will have to be dealt with. Please explain to us how you intend to get a handle on that problem. Something that cropped up in my mind is that despite the substantial losses incurred last year, Covestro increased its workforce, all told, 1,329 full-time equivalents were hired given that I would ask you to explain why you're expanding your labor force, whereas you're making losses. I would like to express some praise, however, and this is directed to the Supervisory Board. You're doing a wonderful job in presenting the attendance of our individual members of Supervisory Board in a very transparent manner. And all of the members of the Supervisory Board were present during Supervisory Board meetings and committee meetings with the exception of Mrs. Kingo and Mr. [indiscernible] who was sick in October. Next item on my agenda relates to your operations in Russia. I didn't see any commentary on this. Today, please explain to us what activities you have in Russia and what business you conduct with Russia. My next point relates to the Works Council. The activity of Works Council according to the law is honorary that the employees receive their normal salary or wages and are not compensated in addition to that for their activity in the works council. I have seen other companies deal with the situation differently. Therefore, I'd like to ask you how many members of the Works Council exist in Germany. How many works council members have been exempted from their normal tasks. And please, could you tell us the 3 highest salaries that are paid to members of the Works Council. Now you will probably get back to me with arguments on data privacy, but then I will be tenacious. The number of works council members doesn't allow me to draw conclusions from the salary figures you could disclose with respect to the people that they are attributable to. So I just wanted to say that now, the group last year, incurred a loss. And this is why I'd be interested to know how high the expenses in the group were for gifts in total? And could you please let us know what presence were made and how much they cost perhaps the 5 biggest gifts. Despite the cost -- the net obligations from defined benefit pension commitments rather defined benefit pension commitments, EUR 430 million were spent in 2022 given a loss of EUR 277 million. This means without this net obligation from defined benefit pension commitments, you wouldn't have actually incurred a loss. And here, I'd like to know why, despite the losses, you continue to pay into the defined benefit obligation. You said that Mr Toepfer will join Airbus and the further commentary on the Board of Management gave me the impression that people may be fleeing the Board of Management. My question is whether the shareholders should do the same and perhaps also fleet to Airbus. So my question is what's happening. This is a mass exodus of Management Board members. And a question for Mr. Toepfer He asked for his contract to be ended prematurely. On conclusion of his contract will severance payments, bonuses, et cetera, be paid. In other words, how much in terms of monthly salary would you have to still pay Mr. Toepfer in particular, I'd be interested about the Prisma tranche. EUR 989,000 so we're talking about almost EUR 1 million. 2022 was a last year. And 2023 is almost half over. It doesn't look all that good either of these EUR 991,000 will Mr. Toepfer receive a portion, although he's leaving the company. With respect to Mr. Schäfer in the annual report, you have stated a pension commitment of EUR 126,750 per year which doesn't lap for EUR 126,750 a normal employee would have to work an entire year, and you're just paying this as a pension excuse me, a pension installment to a former member of the Board of Management or someone who will become a former member of the Board of Management. So my question is what the conditions are for these payments? What is the age limit will additional salaries be counted against this we do. And what other pension installments will be paid 2019 Prisma tranche that goes on to 2022 was paid out or excuse me, was deferred in January of 2022 defer it. So you postponed it. So that the other shareholders understand what we're talking about, we're talking about 418,000 -- 488,000, Mr. Shafer, 211,000 and then EUR 256,000 for the fourth board member. So apparently for a last year in this Prisma tranche, there still is -- there still are payments that are being made. And this is why I can't understand the commentary made by the SDK who claim that the system has proven worthwhile I don't see how the pension installments and the payments from the Prisma tranche actually fit. In addition to the pension obligations in Prisma, there's an expense for pension obligations for 2022, the year in which the loss was incurred. And this expense for Mr. Steilemann was EUR 393,000. EUR 90,000 is going to be transferred to its obligation. This is going to be EUR 90,000. Mr. Schafer EUR 186,000 and EUR 246,000 for Mr. Toepfer. This isn't something that we understand the entire system of Management Board conversation is too complex. Therefore, I'd like to ask you how many employees are working on this system. For these 4 members of the Board of Management. And can the employees and management board members not be paid in a way that is understandable in order to avoid a tranche popping up surprisingly somewhere that no one can understand. Now insurance expenses have dropped. Why have your insurance expenses dropped. At the same time, you have received insurance premiums, and they have risen from EUR 30 million to EUR 36 million. The question I have in this regard is what premiums or what do you receive insurance premiums for -- and why are these premium -- or why did these premiums rise in 2022?

Mr. Kibar, thank you for your submission ladies and gentlemen. We now need a couple of minutes in order to prepare answers to the questions we've received so far. Therefore, I shall interrupt the AGM. Once again for approximately 20 minutes, after which we show continue the AGM with the first round of answers. [Break]

Ladies and gentlemen, we hereby resume the AGM, as you can see on screen, the Supervisory Board, the Board of Management and the notary public are still present here today. Therefore, we should like to introduce the first round of answers in response to the first round of questions. And I'd like to hand the floor to Mr. Steilemann, on behalf of the Board of Management.

Mr. [indiscernible] you asked about the influence of energy cost bureaucracy and taxes on future site investment all investments project of Covestro have to satisfy certain requirements with respect to profitability and economic liability this includes current site factors such as energy costs, Tax situation and approvals as well as time to implement. [ Mr. Berg, ] you asked about the specific and impact of fasting increases in energy costs on the TDI plant of Covestro in Germany. Furthermore, you were interested in actions that Covestro has initiated in order to react to the situation. Chemicals is a central industry to Germany for the success of the energy transition. We, as a chemical company are aware of our responsibility to combat climate change. And Of course, we depend on green electricity in order for the transition to succeed in Germany and for Germany to remain an attractive business side we need large amounts of renewable energy quickly at affordable prices. In total, the chemical and plastics industry in Europe is facing a huge challenge. A lot of plants in the current crisis couldn't be operated profitably. The danger of the industrialization, therefore, cannot be ruled out, especially given that other regions are setting very unbureaucratic and attractive incentives. The most recent measures taken by the U.S. government are a good example of this. Nevertheless, we're optimistic that we will master the current crisis and emerge from it stronger than before. However, we need political pragmatism and above all speed in order to do so. In Northern Australia, for instance, about 6,500 of our nearly 18,000 employees are active here. Covestro produces 1/3 of the total global production accordingly. We want to invest in the transformation and expansion of our sites in order to make sure that our jobs here in Germany can also be passed on to future generations. One prerequisite for this is the expansion of renewable energy Covestro will source much more energy from renewable sources that it's doing today, but we need to have much more competitive prices for renewable energy in order to do so. The length and complexity of approval procedures also play a role. In both cases, policymakers have to take action and settle the proper stage. Covestro in terms of the product TDI, has thanks to its proprietary fiberglass technology has a leading position in terms of costs in Germany due to the drop in energy costs TDI plant, therefore, is capable of being competitive in production against the foreign competition. Therefore, at present, we don't have any plans to restructure the German or European production infrastructure, especially given that our concept of regional production for regional markets is being upheld. [indiscernible] You asked about cost saving programs which in other companies in the chemical industry have been announced and whether Covestro has similarly similar plans or believes that they are necessary. The constant optimization of workflow and processes has become an integral part of our organization from current measures we can count supplementary initiatives to implement to improve cost of fixed assets, and we have other measures also in place, which will result in tangible relief. This is flanked by portfolio measures such as the successful sale of our 3D printing and additive manufacturing businesses and the announced necessary closure of our Composite Materials business in [ market debut ]. [indiscernible] You asked about the status quo of the planned MDI investment of Covestro and where we believe the future of the chemical industry is. In view of the European energy prices and the constant weakening of the global environment in November 2022, Covestro decided to pause a project for a world-scale MDI plant and to reassess the endeavor. Therefore, the decision on the future site of the plant remains to be taken long term, we'll see long-term growth for global MDI demand driven by trends for energy-efficient construction. And we want to profit from these trends. We will continue to invest in growth in all regions across the world. [ Mr. Beckendorf, ] you also asked about further changes in the geographical distribution of production site of Covestro within the next 5 years. As I already mentioned, we currently don't plan to change our German or European production network or sites in the United States as well as in Asia firms value-generating elements of our global production network. New build of a plant to require painstaking, planning that can take up to 7 years. And even if you want to add on to an existing plant, it takes about 4 to 5 years. Therefore, in the next 5 years, we do not expect any significant change to the geographical distribution of our production network. [ Mr. Beckendorf. ] You are also asking about our considerations with respect to the science-based target initiative. The science-based target initiative, SBTI for short, is a partnership of a number of different stakeholder groups that are interested in developing science-based environmental initiatives in order to achieve the 1.5-degree target. Our net 0 target is based on scientific assumptions that are suitable for to reduce global warning to 1.5 degrees, and it exceeds across sector orientation, [indiscernible] Our interim goal for 2023 is a reduction of greenhouse gas commissions from in-house production and procured energy of 60% compared to 2020. SBTI, however, requires a reduction of just 42% over the same period, the development in relation to sectors specific orientation assistance for the chemical industry from SBTI which will be available from 2025 is something that we continue to monitor. We don't have any plans at present to validate our goals through SBTI as soon as the goals for the sector have been presented. We will revisit this issue. Having said that, I would like to now hand the floor to Mr. Toepfer.

Thank you very much [ Mr. Matt ] you asked if we would consider paying a minimum dividend due to the solid liquidity that we referred to. Now I can tell you that our dividend policy provides for a dividend payout only in the case we have a net profit with a growth between EUR 35 million our net profit in 2022 was unfortunately negative. And therefore, is not possible to pay a dividend. Now if we look at the free operating cash flow, this was also only slightly positive, so that doesn't really give us any significant leeway for dividend payment. We could, of course, envisage in the future if the liquidity would allow for it. If we adjust the dividend policy in the upwards, but we don't want to have a lump sum minimum dividends so that we can then continue to adequately react to crisis situations and continue to whether these storms as a company [indiscernible] also asked where we currently see ourselves with regard to the share buyback program announced in February 2022. Now in February 2022 we did announce a share buyback program of EUR 500 million because at the time, we thought investment in our own shares was the most worthwhile investment for our shareholders that was accompanied by the liquidity from the very successful and fiscal year 2021 and the estimates that we had at the time, which were valid for the overall development 2022. Now as part of 2 tranches, we have EUR 75 million, each in the first half of 2022, we have already EUR 3.5 million worth of shares due to the depression or the recessionary environment due to the Russian war Russian and Ukraine. We then pause the buyback program . Nevertheless, we are still convinced of the attractiveness of our investment. And we will therefore continue that program as soon as we can see a sustainable recovery of Horizon. On the horizon I think you also asked if we were intending to make any amendments in the corporate structure and company structure due to the unfavorable tax mix. Now we are an internationally operating company. And in 2022, we had very positive tax results outside of Europe. That means that we had high tax in these countries on the contrary, we had very negative results, in particular, in Germany because of not applying because of the deferred tax asset -- that led to an unfavorable mix which led to a high tax growth in the Covestro group. Because this is a result of favorable geographic alignment of the corporation, we don't see any -- and then we see the structure as being [indiscernible], you also asked about class action lawsuits U.S.A., any risks also regarding the supply chain and the pipeline in [indiscernible] now since 2018, we've had 12 class actions that have been filed in Western Pennsylvania, in all of these transactions, it is claimed that various manufacturers of MDI and TDI had in the MD on TD [ infringement ] a number of laws regarding the production of MDI and TDI and the general -- Attorney General of Mississippi in September 2019. On behalf of the state and its citizens made similar assertions also. The infringement of consumer protection rights and competition law. But in the time -- in the meantime, those claims have been invoked to Covestro at the moment does not see any justification before the assertions made in these assertions and the discovery phase which is currently ongoing. Will be concluded probably by 30th of June. You also asked about any legal risks resulting from the supply chain. Now I would, first of all, like to say that Covestro is 100% committed to complying with human rights. We advocate the UN guiding principles for industry and human rights and the respective national action plans we are committed as a company to our responsibility to comply with all human rights including in any subsidiaries and any global supply chains and the value creation change and we also wish to prevent any infringement on human rights. We have a respective management system and our human rights office which is supervised by our global Human Rights Officer is committed and dedicated to the comprehensive integration of human right requirements in our company, our management approach is based on the guiding principles for industry and human rights at the United Nations also takes into account for the German supply chain but due diligence and the French more on compliance with human rights. Now these measures implemented in collaboration with our human rights office and our management system for human rights due diligence follow in the following. First of all, A clear commitment to protecting human rights in all Covestro's activity secondly, a regular risk analysis of our business activity all along the value creation change. Thirdly, the definition of any measures required to prevent identified risks and monitors these. Fourthly The introduction of a complaint mechanism for an edged incidents and infringement specifically, reporting about our activity since our complaint mechanism has been in place since 2021 And has been no notification of a confirmed infringement of human right the legal risks referred to arising from the supply chain due diligence tax are limited to trade requirements they are not industry specific and the work of associations, in particular, of the VCI and direct indirect exchange with legislators have given us a good understanding of the expectation of the made of the chemical industry. Now we believe that as Covestro, we are in a good position to come from any potential legal risk in conjunction with the supply chain due diligence Mr. Martin, you also asked about our CEO the connection pipeline.

Any potential legal risks in conjunction with the supply chain due diligence. Mr. Masek, you also asked about our CO connection pipeline. Now for many years, we have been of the belief that the litigation trial has no grounding and we will indeed be successful now the Supreme Court of the [indiscernible], in its decision on the 31st of August 2022 had -- they dismissed the litigation suit as unjustified. And the court in Dusseldorf on the 28th of February 2023 also followed suit. We, therefore, are still I'm extremely confident that any pending -- a few pending lawsuits against us will also be rejected. Mr. Masek, you asked about the reasons for the depreciations in 2022 for material assets and deferred tax assets. And you also asked about the calculation method for these assets. Now the depreciation for fixed assets was calculated in accordance with the requirements of the international accounting standard, IAS 36. Now according to this, if there are indications of depreciation of an individual asset or individual assets which can be allocated to units which is generating payment means has to be audited. If the achievable amount does not exceed the respective booking and accounting amount, the depreciation is posted has the difference between the booking value and the achievable. Now in fiscal year 2022, the war of aggression started by Russia against Ukraine, led to extremely negative changes in the economic environment of Covestro, in particular, the huge increase of energy prices which could only be confronted and passed on to customers to a certain extent. The expected downturn in demand led to a generally recessive -- recessionary environment due to this, and the fact that we saw a considerable increase in the third-party capital costs, a number of audits were initiated. Covestro believes the strategic plans were done correctly and this is done correctly on the various reporting levels within the 7 business units specialty which also have the 2 reporting segments Performance Materials and Solutions and Specialties. Now as part of the audits of 2022, the achievable volume was posted as a cash flow of the expected future cash flow in these units. The forecast of the -- for future cash flow are based on current corporate planning of the Covestro Group and normally look at the forecast period of 5 years and the result of this -- of these depreciation audits and checks were -- has found that the achievable volume for business with standard poly to polyols and standard TDI and so on and so forth would be the low in the respect to the [ economic ] value and therefore an exceptional depreciation was to be carried out in these areas, now these adjustments were in particular, the result of a downturn in the economic environment, which also had a number of negative effects. Now, we have the cash flow forecast before all of the assumptions about future sale prices and volumes costs, the growth rates and so on and so forth. And that has a negative effect on the attainable volume. On the other hand, the considerable increases in costs in the raw materials and energy sectors will lead to fundamentally increased capital binding. Now to record the depreciation, in accordance with the regulations of IAS 36, first of all, the business and company value of the respective areas was completely taken into account. In the business year -- in fiscal year 2022, we had a total of depreciation of EUR 463 million and EUR 27 million of those assets and EUR 463 to the earnings of the results of the previously noted depreciation assessment. Of this EUR 436 million, EUR 267 million accountable to the business with standard polyurethane polyols, EUR 99 million to standard TDI, EUR 46 million to the business with powder resins and EUR 27 million polyurethane specialties and solutions. Moreover in 2022 in Germany within the Covestro AG we had around EUR 250 million active deferred taxes, which were are not applied. And the nonapplication of these active deferred taxes is due to the fact that we do not assume that these deferred taxes will be usable within an applicable and acceptable period. Mr. Masek, you also asked about the reasons for the thus far only qualitative comparative forecast 2023. Now in past years, we provided a forecast, in particular, for the steering KPIs, EBITDA and FOCF always as quantitative values as part of the EUR 500 million. That -- now given the fact that we believe that 2023 will continue to be a challenging year with certain economic outlooks and geopolitical frameworks, we decided for the time being to provide quality -- qualified comparative values. Now our contracts with our customers have short terms. At the same time, we have high volatility with the raw material and energy costs. Moreover, the demand situation is very difficult to predict still, and that is why the system face -- forecast for Covestro is not practicable in an integrated fashion. It is our goal, however, -- regarding the EUR 500 million EBITDA and FOCF that we wish to return to this. And we also wish to have a ROCE over WACC within a certain level defined as well. And further developments will actually be decisive for when we can return to that system. Mr. Beckendorf you asked whether in the ongoing fiscal year, there will be any further exceptional depreciations to be expected for material assets and immaterial assets. You also asked according to which conditions in the medium term we may have recoveries. You also asked about the individual headroom for various units. Now we take into account all of the balance statements and assessment methods. And we use and apply all of these indicators for all generating units. Now regarding the activated business and company value, we always have to look at these indicators. And so far as there are any indicators which suggested, there will be any depreciations that were not applicable to 2022, another test would -- we carried out. Now there could be an asset recovery, on one hand. On the other hand, We cannot have an allocation here for depreciated assets. At the moment, we don't see any significant indications that the reasons for these exceptional depreciations in fiscal 2022 are now no longer applicable. At the same time, we don't see that the depreciations that have been carried out in 2022 will not be sufficient. Now regarding the so-called headroom, at the time of the central test in the fourth quarter of '22, the following applied. Overall, when there was excess of the generated [indiscernible] units, which were not subject to any depreciation, and this has exceeded the overall book value of EUR 8.7 billion by about EUR 4 billion. A large portion of this headroom was due to the segment Solutions and Specialties. Now we had book values of EUR 300 million or more for all nondepreciated payments. And we had a relative headroom at least 20%. The average relative headroom for all nondepreciated areas was around 46% on the day of calculation. Now please do understand that we cannot provide you with any further details for competitional reasons. Now the question of active deferred taxes, the differences between the tax value and IFRS, the group balances, balance statements and any posted losses are subject to forecasts. Now in the medium term, we may see a reapplication of active deferred taxes in Germany, if the forecast for Covestro AG would say that this is probably in a foreseeable time. Now Mr. Beckendorf, you were asking about considerations about the dividend policy and what our considerations might be and what our free operating cash flow might allow for here for a more suitable basis of calculation. Now, I fundamentally I agree with you that there are a number of difference in the perspectives that one could take. Now at first, we decided not to provide any adjusted figures because we would then have to -- we would like to be able to assess all of our options. That is why we believe that nonadjusted reported figures are more pertinent as indicators, and these are the figures that have been provided by the auditors. Of course, it could be envisaged that we have a cash parameter as a reference parameter. And then free operating cash flow is one of our key core performance indicators. It's a very relevant parameter. And given this, all in all, we have taken the nonadjusted net profit as the reference parameter for our dividend policy, and we believe that this is the correct way to proceed. Now Mr. Beckendorf, you also asked for an explanation of the reasons for the depreciations that have been posted in for information about which business units were affected in particular. You also asked as to whether there were any depreciations on parts of the business Resins & Functional Materials that was acquired in 2020 -- 2021. Now in fiscal 2022, we had depreciation of EUR 463 million in the financial statements and EUR 27 million were accounted for by a number of different assets and EUR 436 million of depreciations of assets as a result of central depreciation calculations. Now these calculations, our impairment tests were carried out on the basis of what is known as generating units. Now, of the EUR 463 million, EUR 267 million were accounted for by the standard polyol business; EUR 99 million, standard TDI; EUR 46 million of for the powder resins and EUR 27 million for the polyurethanes specialties and solutions. Depreciations in the powder resins, we're referring to our nonfixed assets which were applied during the sale price allocation during the acquisition of RFM. Now in fiscal 2022, the war of aggression started by Russia, this led to significant negative changes in the economic environment. And because these increased costs could only be passed on to customers to a certain extent in 2022, we saw a downturn in the business forecast year-on-year. And a further effect year-on-year in 2021 was the increase of third-party capital costs. Mr. Beckendorf, you also asked about the reasons provided by the Board of management regarding the poor development of the Covestro shares compared to the selected STOXX Europe 600 Chemicals index. Now, STOXX Europe 600 Chemicals is a very broad and diverse index, with our cyclicality, we were affected by the energy crisis and global downturn in demand. In particular, we're therefore somewhat below the overall performance of the index. Mr. Beckendorf, you also wanted to know if the share buyback program would be resumed and how successful the implementation has been so far. And you also asked if it might not be a better idea to completely stop that. On the 28th of February, 2022, we have announced the program for the buyback of shares to the value of EUR 500 million. We did that because we were convinced that, that was the best way of investing in our own shares to then remain profitable. And by June 2022, we had bought back 3.5 million shares to the value of a total EUR 150 million. The average purchase price per share was EUR 43.08. Now given the challenging economic environment, we paused the program and have not carried out any further tranches. We believe that we need to see a foreseeable stabilization of our liquidity before we can resume this. And we are still, however, convinced that our shares are very attractive investments. Now Mr. Beckendorf, you also asked whether visibility regarding the forecast for 2023 has improved and when we will be more specific about this. Now as I've already set out, given the fact that the economic and geopolitical frameworks and conditions continue to be challenging and uncertain, we have, first of all, decided to allocate the forecast for 2023 as qualified -- as being a qualified comparative. However, our plan is to return to the quantitative figures with EBITDA and FOCF and with the parameter ROCE over WACC within one band. However, wait and see how the economy develops before we return to them. Mr. Beckendorf, you also asked whether our net profit for fiscal 2023 will at least be balanced. Now if you look at our EBITDA forecast, significantly below the previous year, we might have a positive net result. But where we will actually be at the end of the day will depend on the actual achieved EBITDA and also tax burdens across the various different countries. And more specific forecast is not possible at this moment. Mr. Beckendorf, you also asked about our portfolio of the forecasted mid-cycle EBITDA concept with a planned EUR 2.8 billion. Now as I've already said, in almost 3 quarters, Covestro was subject to energy price developments like we have never seen before. We are now, however, back in a realm where we believe that we can make our European sites competitive again against imports from other regions. Now in absolute terms, the import situation is due to the recessive demand. Now with a return and recovery of the economic environment, we will -- we still stick with our mid-cycle forecast and that is an EBITDA of EUR 2.8 billion in 2024. And that is no change over what we have already announced in the past. Now Mr. Beckendorf, you also asked what our electricity and gas prices -- what our forecast used for the electricity and gas prices for 2023. And you also asked whether we would intend to apply for relief for over EUR 25 million. Now, fundamentally, we have contracts for short-term and midterm pricing. So that is up to 3 years. In Germany, that would therefore be the index of the EEX electricity and gas energy index. Now, we will apply for the energy price break with absolutely by the top limit of EUR 25 million, assuming we do fulfill the criteria such as with these various contracts and options. We do, however, rule out applying for an energy price break relief for -- over EUR 25 million. And I would now pass to my colleague, Sucheta Govil.

Thank you. Beckendorf, you also asked about the share of alternative raw materials in production and the share of circular solutions in our overall product portfolio for 2022 and 2021. Sales of products based on alternative raw materials are currently around 1% but have already increased compared to 2021. In line with sales volumes, the proportion of alternative raw materials purchased is also around 1%. In order to drive the development of our sustainable product portfolio with a focus on circularity, we announced last year that in the long term, we intend to offer all products in a climate-neutral version. That follows the principle of the circular economy. As a step in this direction, we are focusing on our Circular Intelligence, or our CQ portfolio solutions with alternative raw materials. They consist of at least 25% alternative raw materials. And for us, alternative raw materials are raw materials based on biomass, CO2 or waste or materials produced on a nonfossil basis using renewable energy. One example of such a sustainable product is our climate neutral MDI. And under the CQ label, which is only a few months old, we have already sold almost 1,000 metric tons in 2022. The further expansion of a sustainable product portfolio is supported by our innovation portfolio. In line with our sustainability goals by 2025, 80% of our R&D project costs will be used for research and development in areas that contribute to achieving the United Nations Sustainable Development Goals. In particular, we support product innovation that contributes to these goals whilst taking into account our innovation, our goals regarding circular economy and of course, climate neutrality. We have already been steering the product portfolio towards greater sustainability since 2016. At the same time, of course, we are revising our method to also assess the sustainability of our existing products, particularly with regard to circular economy and climate neutrality, and to align our product portfolio even more closely to this in the future. With that, I hand over to my colleague, Dr. Klaus Schafer.

Thank you, all. Thank you, Such. Mr. Beckendorf, in view of the strong rising energy costs, you've asked about the valuation of the competition or competitiveness of the German and European sides of Covestro. And you also asked whether a creeping deindustrialization looms on the horizon. Chemicals is a central industry for Germany, and it's elementary if we want to succeed in the green transformation. As an energy-intensive industry, we shoulder a special responsibility in combating climate change. However, we're also especially dependent on the availability of green electricity in order for the transformation to be successful in Germany and for the site to remain attractive over the long term, we require above all large volumes of renewable energy quickly and at competitive prices. Overall, the chemical and plastics industry in Europe is facing enormous challenges. Many plants can't -- or in the past, weren't able to be operated profitably in the current crisis. A danger of deindustrialization, therefore, cannot be ruled out, especially given that other regions are already employing positive and unbureaucratical incentives. The most recent measures taken by the U.S. government are a good example such as the Inflation Reduction Act. Nevertheless, we're confident that we'll be able to master the current crisis and emerge from it stronger than before. However, we need political pragmatism and above all speed of action in order to do so. In North-Rhine Westphalia, for example, approximately 6,500 of our just under 18,000 employees worldwide are active. This is where we conduct 1/3 of our total global production. Accordingly, we intend to invest in the transformation and the expansion of our sites in order to make sure that jobs here are future-proofed and can be handed down to future generations. It's very decisive to expand renewable energy massively and quickly, after all chemicals and Covestro will need a large amount of renewable energy en route to achieving climate neutrality. Another essential point is the duration and complexity of approval procedures. In both cases, policymakers have to take urgent action and set the right stage. Given the significant reduction in energy prices in Germany and Europe that has occurred recently, we are now in a situation in which our European sites can or have regained their competitiveness over imports from other regions of the world. As before the height of the energy crisis over the past year, we are active, again, in regional markets with regional competitors that are subject to similar energy costs in view of the increasing liquid gas capacities -- import capacities that is. We assume that the energy price will remain on the current level. And therefore, the competitiveness of our production plants is secured. Mr. Beckendorf, you asked us about potential production closures by us in Germany and whether we will be able to benefit from some competitors failing. Furthermore, you asked us about the current capacity utilization of our plants in Germany and the share of plants that is operation. The current and future production costs in Europe are a constant burden, with which both the individual companies as well as the sector as a whole and the regulatory authorities have to deal. Thanks to our intensive research activities in the development of innovative production methods such as gas-based technology in TDI manufacturing or the adiabatic-isothermal phosgenation technology for MDI, Covestro commands a leading cost position with its core products, cost leadership through technology leadership. In addition, we believe that our key products, MDI and polycarbonates, have wonderful future and growth prospects in insulation, electromobility and wind energy. Capacities available in Europe are therefore essential in order to meet this demand. We, therefore, currently don't plan to restructure our German or European production infrastructure. When competitors decide to close production plants permanently, such decisions can have a negative impact on product availability of the industry, especially in times of heightened demand. We plan to run our production facilities at full capacity for our core products, TDI, MDI and polycarbonates by the end of the year. The capacity utilization of the European plant base is limited, unfortunately, due to a temporary scarcity of chlorine. Otherwise, our plants, unless they are subject to scheduled or unscheduled outages, are in full operation. Moving back to chlorine. Mr. Beckendorf, you asked about the backdrop and the effects of the production outage of the chlorine production activities at the Dormagen site with respect to the production of polycarbonate, MDI and TDI. The chlorine plant at Dormagen was damaged due to an incident in August 2022, which was last year. And due to the limited availability of spare parts and resources, the plant can only be recommissioned step by step. Furthermore, security is an indispensable basis for the business activities of Covestro. Therefore, we work closely together with the authorities and adhere resolutely to existing provisions and regulations, which can result in time delays. Due to the incremental and only partially possible recommissioning of chlorine production at the Dormagen site, the limitations for Covestro's in-house TDI production and for the chlorine deliveries to other companies active in the chemical parks have been limited. Let me clarify something, the production of polycarbonates and MDI is not -- does not affect the Dormagen site as a result of force majeure. Covestro manufacturers polycarbonate and MDI, amongst other things, at the sites in Krefeld-Uerdingen and not in Dormagen. For the sake of completeness, I would like to mention, however, that polycarbonates and MDI has a relative force majeure in chlorine production are affected in Krefeld-Uerdingen and, therefore, are only available to a limited extent. We currently assume that, by September 2023 at the earliest, we will be able to fully meet our delivery obligations and, therefore, eradicate the force majeure situation until we have overcome force majeure. As a matter of principle, however, we will only be able to deliver limited amounts of the products that are affected by force majeure.

Okay. Then I shall continue now. Mr. [ Mastek ], you asked about the current number of participants in our AGM. 113 participants are currently dialed in to today's AGM. Mr. [ Mastek ], you wanted to know about our preference with respect to a virtual AGM in 2024 and 2025. We could envisage holding further virtual AGMs and therefore, we are putting up for vote, the authorization of us in order to implement them. The decision on whether to exercise the authorization will be taken at the beginning of the corresponding year. Mr. [ Mastek ], you refer to Item 6 on the agenda, approval of the compensation system for the Board of Management, and you asked about the reasons for the introduction of an adjustment clause for unforeseeable and unplannable developments in the long-term variable compensation referred to as the long-term incentive or LTI for short. You asked why this clause has been introduced and what developments this entails? Well, first of all, we expand the possibilities of the Supervisory Board, which in the area of short-term variable compensation already has options to include the long-term variable compensation. This possibility of adjusting the payout percentage in the event of unforeseeable and unplannable development is supposed to prevent take on effect in the form of exorbitant increase in payout. These could result from greenhouse gas emissions being reduced less or more than planned. It also enables the correction in the event of acquisitions, which could make a significant contribution to future emissions. This is supposed to avoid that the assessment of strategically important investment decision is curtailed by potential effects on the long-term variable compensation. The Supervisory Board is therefore authorized in the event of material structural changes in the Covestro Group to take account of regulatory changes or unforeseeable economic developments that have a significant impact on the achievement of goals by the LTI programs, the LTI percentage payout ratio, et cetera and exercise its discretion in doing so. Such individual significant changes and developments are deemed to the present in the event of a change in total payout from the LTI program of at least 5 percentage points compared to the situation without considering the event. Mr. [ Beckendor ], you also asked the extent to which the AGM of the chemical -- of the Association of Chemical Industries in 2020 took place? You also asked why today we are not holding a hybrid event. Details on general meetings of the [ PCI ] over the recent years are not available to us. We can at least say that the AGM there in 2022 was hybrid and that 60 guests attended virtually and 154 guests were present in person. In addition, the legislator in 2022, has anchored virtual AGMs as an alternative to in-person AGMs in the German Stock Corporation Act. It also has created the opportunity to conduct AGMs in virtual format in the future after assessing the possible options under consideration, in particular of this current legislation. Our shareholder structure, expected costs, the current pandemic situation experience gained in previous years, we reached the decision to conduct a virtual AGM in 2023 as well. Mr. [ Beckendor], you asked about the number of attendees at today's AGM compared to the in-person AGM in 2019. In addition, you'd like to know the share of participants from abroad. We are transmitting our virtual AGM via various channels, including global public channels, such as our website and various social media channels. We do not have enough information about how many people are actually following the AGM via these channels, unfortunately. In our investor portal, as I said before, we have a total of 113 shareholders and/or their representatives who have dialed in, in the investor portal. You and everyone else has at their disposal, the participants register list us, all of the voting proxies nominated by the company present here in the room as well as the shareholders that they represent, along with their respective shareholdings. In addition, in line with the most recent statutory regulations, all shareholders and representatives or proxies have been stated who have dialed into the AGM electronically today, the participants register also contains information on the domicile of the shareholders listed there in. However, whether they are actually participating from a domicile abroad or from another location is information that is not at our disposal. At our last in-person AGM in 2019, 554 shareholders or proxies attended on-site in Bonn. Mr. [ Beckendor], you also asked about the cost of this year's AGM and about the cost savings compared to an in-person AGM. For the virtual event this year, 2023, the costs amount to approximately EUR 800,000. With this concept, the cost therefore, are about half of the cost of an in-person proceedings. Mr. [ Beckendor ] you asked about absolute CO2 savings achieved through the implementation of the AGM as a virtual AGM. It is very complex to conduct this type of the calculation as you may well imagine, and according to our knowledge, it is not very precise. But as I mentioned in opening, we are convinced that our virtual AGM has a much more favorable environmental footprint. This year, we are announcing an external meeting room, and we're transmitting the AGM from within our own office space here in Leverkusen. We also don't have as much travel cost by the service providers or other employees that are supporting the organization of the AGM. Employees, resources, furniture and technology can be used elsewhere in the company. Therefore, the number of individuals participating in the AGM today has also been reduced to an efficient minimum. We have fully renounced guests due to the virtual format. Therefore, expenses and environmental impact by catering waste and water have been reduced further. Mr. [ Beckendor ], you've asked about the reasons for technical problems when connecting speakers today, and you wanted to know how Covestro will ensure next time that everything worked seamlessly. Mr. [ Beckendor ] as you were able to figure out yourself, the last step to connect the speakers didn't succeed seamlessly. For this reason, we have agreed on an alternative solution together with the service providers involved. As I mentioned earlier, we apologize for the long waiting time. At current, we are analyzing with everyone involved the potential causes so that if we were to hold virtual AGMs in the future, we could avoid any technical interference and disturbance. Mr. [ Beckendor ], you asked about the specific reasons why, from the perspective of the Supervisory Board, the compensation system of the Board of Management had to be changed. The amendment to the compensation system relating to introduction of the possibility to adjust the payout percentage in the event of unforeseeable and unplannable development. So doing a corresponding discretionary adjustment was included analogous to the existing provision in relation to short-term variable compensation, Supervisory Board in doing so would like to have a uniform structural approach for both variable compensation components by adding the sustainability component. The Supervisory Board availed itself of an option already existing in the system. So basically, this was merely an implementation of an existing provision, not an amendment. Mr. [ Beckendor ] you asked, under what conditions the Supervisory Board would avail itself of the newly created possibility to adjust the payout percentage of long-term variable compensation, LTI. As I mentioned earlier, the possibility to adjust the payout percentage for the LTI was introduced in order to be able to take account and react to unforeseeable and unplannable developments. These can be -- take on effects in the form of an exorbitant payout that can result from a significant decline in production and a reduction in emissions that are not primarily due to in-house measures. It also enables to correct -- to make corrections in the event of acquisitions that make significant contributions to emissions and avoids that the assessment of strategically important investment decisions is curtailed by the potential impact on the long-term variable compensation. The Supervisory Board is therefore authorized in the event of material structural changes within the Covestro group regulatory changes or unforeseeable economic developments that have a substantial impact on the total target achievement of the long-term incentive programs to adjust the corresponding payout percentage according to its discretion. Furthermore, you asked whether Supervisory Board adjusted the payout of the Prisma tranche 2019 to 2022 under the assumptions of the tranche already included a CO2 factor. Concrete response to this question is impossible unfortunately, because the savings potential for greenhouse gas emissions over a period of 4 years for the first time in the Prisma tranche 2021 to 2024 was introduced in the tranche that you addressed, therefore, 2019, 2020, 2 calendar years are contained for which no savings gold has been identified. At the same time, in this 4-year period, there were 2 events that the Supervisory [indiscernible] definitely have considered in this period. This is the acquisition and integration of the business segment Resins & Functional Materials, DSM and the significant decline in production. And primarily -- and the reduction in emissions that was caused primarily by this in 2022, both transactions as a matter of principle, are assigned to the category of those events that the Supervisory Board could consider for an adjustment. Mr. [ Beckendor ], you asked about the ratio of reduction targets for greenhouse gas emissions for the short-term and long-term variable compensation and you expressed your concern about a one-sided incentivization. Furthermore, you asked about the expansion of variable compensation by additional ESG criteria. Well, first of all, the targets are different between STI and LTI with respect to the corresponding time horizons for the short-term variable compensation as before, we have the group-wide compensation program, Covestro profit sharing plan, Covestro PSP for short. This applies for the predominant number of employees of Covestro Worldwide. The members of the Board of Management of Covestro also participate in the Covestro PSP program and receive their short-term variable compensation on the basis of the provision of this compensation program. For this, the Supervisory Board recently for a multiyear period, namely the period from 2022 to 2024 establishes values for the 100% payout from the corresponding key figures including the greenhouse gas emissions of Scope 1 and Scope 2 within the scope of the long-term variable compensation program for the tranche is up until 2025. We defined an emission target only for the direct emissions i.e., Scope 1 emissions. Accordingly, the desired reduction for both stages, Scope 1 and Scope 2 becomes relevant for the first time for the tranche ending in 2026, the corresponding target for both compensation programs has been derived from our road map to climate neutrality with which by 2030, we want to achieve a reduction of greenhouse gas emissions of 60% compared to 2020. The reduction of emissions plays a key role within the scope of our company vision to fully align our business to the circular economy and sustainable growth. The Supervisory Board, therefore, believes the greenhouse gas emissions are one of the predominantly relevant key figures in order to ensure the operative orientation of the Covestro Group and the company vision. This is done justice to in our view by the fact that the key figure in both -- the key figure has been anchored in both variable compensation systems on top of that, the indirect greenhouse gas emissions of upstream and downstream processes have to be reduced as well in the value-added chain. This is Scope 3, a concrete target that will be formulated during this year. This will definitely be considered in the targets for variable compensation. On top of that, at present, for the new tranche from 2024 to 2027 of the long-term compensation system as well as for the short-term compensation system starting in 2025, various options for further key figures on the basis of ESG are being discussed and reviewed. We ask of your understanding that at present, we cannot make any concrete statements with respect to the detailed design of future compensation plans. Mr. [ Beckendor ], you asked about the authorization to conduct virtual AGMs, which is up for vote today. Let me start by saying that in the last years, we made good experiences with the virtual format. With respect to the virtual AGM format, we received positive feedback throughout. The drawback, however, was that we were not able to enter into a direct dialogue with you. Now that we have provisions in the German Stock Corporation Act that enabled the conduct of virtual AGMs, that legislator has strengthened the rights of shareholders significantly. The Board of Management and the Supervisory Board are therefore of the opinion that this virtual format is, therefore, practicable and also share friendly as an alternative to classical in-person AGMs. For this reason, we propose to you under Item 7 on the agenda to amend the articles of incorporation in order to authorize the Board of Management to reach decisions on the format of future AGMs in the future. We made a conscious decision in favor of the alternative of the authorization and the like the further option envisaged by the legislator, where the articles of incorporation of a company in general can envisage the conduct of virtual AGMs. In this way, from year-to-year, a flexible decision can be reached in the interests of the company and all of our shareholders. Our complication definitely allowed you to glee the fact that we intend to exercise this authorization in a responsible manner. And for this reason, we don't want to completely exhaust the potential authorization period of up to 5 years this year fully and therefore, have limited it to the next 2 years, 2024 and 2025 for the Annual General Meeting in these 2 years, we will reach the decision according to due diligence, exercising our discretion with due responsibility, taking account of shareholder rights, sustainability issues as well as cost aspects. And considering the interest of the shareholders, we are fully aware of the fact that it can make a difference to shareholders whether the company law measures you mentioned are envisaged on the agenda. We ask of your understanding that today, we cannot present you with a binding or general checklist for the next years. And we also ask of your trust that we will exercise our discretionary powers to reach this decision within the ambit of the law responsibly. This brings me to the end of my answers, and I think Mr. Steilemann will continue.

thank you very much, Mr. Pott. Mr. Rautenberg, you asked me what I thought about the geopolitical situation in China and the risks that Covestro has. You also asked about flexibility at Covestro, our dependence on China as a production site and question of reducing our sales market. We are faced with a significant increase in geopolitical risks in all regions where we are active. We are developing emergency plans for all relevant scenarios. Hypotheses for specific conflicts are things that we will not comment on. Part of our strategy has been localization of production in the most important markets. We call this local for local. And this gives us a certain amount of protection against disruptions in global trade streams. Our financial department has also considered a number of possible risks and also has a number of measures prepared and we see that from major investment decisions, we also take into account geopolitical risks. China had a share of just over 20% of our revenue. Although we have a good position in China. This is clearly lower the share -- below the share of China's in global market for our product. So China, is it important market and production site for China. With regard to our existing production setup in China, we have a certain flexibility with regard to the regions supplied from there, but a shift of our existing production site is something which is hardly possible. Mr. Rautenberg, you asked questions about Covestro's climate targets, especially as to when Covestro will be announcing Scope 3 climate targets and whether SBTI certification would be considered with regard as to a goal of the Paris Conventions, limiting global warming to 1.5 degrees. Last year, we gave our own goal in order to have net-zero emissions by 2035. We plan to have these emissions reduced by 60% to 2.2 million metric tons CO2 equivalents compared to 2020. The absolute Scope 1 and Scope 2 emissions last year dropped compared to 2020 by just under 12%, in line with our strategic focus on circularity and climate protection, we are now working on a Scope 3 reduction target, the long-term reduction of indirect greenhouse gas emissions from up and downstream processes in the value chain. We are planning to announce this target this year. In 2022, the Scope 3 emissions accounted for close to 78% of the total amount of greenhouse gas emissions from our group. Most of the Scope 3 emissions were in the categories which are upstream. And we also see a switch in our raw material basis as the major level to reduce Scope 3 emissions. Procuring alternative raw materials is especially important here. By alternative raw materials, we mean all raw materials based on biomass, CO2 waste or non-fossil basis or that are produced with renewable energy. As part of our current target development, we are now analyzing all of the options we have to reduce Scope 3 emissions, including downstream of the value chain. We are acting according to our vision in order to focus completely on circular economy. You also asked about a validation of our climate targets as a result of the science-based target initiative. And if so, when. The SBTi, science-based target initiatives is a partnership amongst a number of different interest groups, their goal being to draw up scientifically founded climate targets within the hope of achieving the 1.5 degree target. Our net-zero target is based on scientific assumptions that we can reduce global warming to 1.5 degrees and exceeds the orientation of the SBTi. Our intermediate goal for 2030 is to reduce greenhouse gas emissions from 60% compared to 2020. SBTi calls for a reduction of 42% in the same period of time. Developments with regard to specific orientation for the chemicals industry using SBTi, which are to be ready by 2024, our developments that we are observing very carefully. Right now, we do not plan to have our targets validated by SBTi. But as soon as the guidelines are available for the chemical sector, of course, we will have another look at that. Mr. [indiscernible], you asked about the residual emissions we expect. What compensation measures we are considering and how we want to minimize the dependence on compensation measures to the greatest possible ascent. Covestro's target is to have net-zero greenhouse gas emissions by 2035 in our own production as well as in the consumption of externally procured energy. We're doing everything we possibly can to reduce our emissions on our own in order to achieve our net-zero target, we have defined 3 different action areas. First of all, optimize our production processes so that we can have a sustainable and energy-efficient production. We also intend to increase the share of electricity from renewable sources. And we are also counting more on the use of green steam from renewable sources of energy. If nonetheless, there are still unavoidable residual emissions after all of this potential has been fully exhausted. The final means would be to consider high value compensation measures. But we are planning to base this on the highest international accepted certification standards. So we are also following the activities of the European Commission with regard to working out a certification system for carbon removals in order to achieve the best possible climate protection effect of a compensation measure. At the present time, we assume that the residual emissions in 2035 will amount to about 200 to 300 kilotons of CO2 equivalent per annum. If compensation measures are used, these will most likely be in accordance with the greenhouse gas protocol. In fiscal 2022 we did not make use of any compensation measures. Mr. [indiscernible], you asked about the challenges when it comes to recycling materials for rotor blades, for wind turbines. I'd also like to say that we focus on circular economy, an important part of that is recycling our materials. So we are working on a comprehensive portfolio of research and development projects with recycling of various materials. This includes polyurethane resins, which are used to manufacture rotary blades. We have identified a number of promising approaches, which would also allow the recycling of composite materials. These include paralytic and chemolytical methods, which in both cases, would allow us to recycle fiber glass as well as the chemical components. Mr. [indiscernible], you asked why despite high losses last year, we hired more employees. You also asked us why we are expanding our headcount while the group is making a loss. In the first half of fiscal 2022, we had already made these hirings. We also were filling vacancies as part of demographic change, and as a result of certain requirements, but the number of employees compared to 2021 has gone up of 17,909 to 17,985 worldwide, that is a figure for 2022. The slight increase in headcount is due, among other things, to the fact that some of the personnel measures were not fully in effect in 2022, which shows you the full-time employee figures as well as demographic change as well as the required overlap for the transfer of knowledge. Also, the number of hirees in 2022 is clearly below the figure of the previous year. In addition, by introducing a restricted hiring approach, this has been in place since about the middle of 2022, we've already reacted to the change in the economic development. And here vacancies are only filled if they are considered critical to business. We're talking here about physicians, which are necessary for economic success. This is approved by the Member of the Board of Management responsible for the particular area. And now I'd like to hand over to Thomas.

Mr. [indiscernible], you talked about the difference in the pension entitlements and why this amount has fallen and how Covestro wants to deal with this in the future. In accordance with the requirements under the commercial law, we also consider this with regard to the fair value. And we talk about the closing date, we see the differences in values depending on the development of the interest rate as well as the amount of assets. With regard to the values we have in the commercial codes statements, which applies for Covestro AG, which was the value reduction in the asset as of the 31st of December, is the one that has the largest effect. But we're talking here about an assessment effect, there is no reason to make any changes in the covering amount. And that's why there is no immediate burden which would not be considered appropriately with regard to those entitled to their payments. You also asked about how many works councils there are in Germany. We understand you [indiscernible] how many members of the works council there are in Covestro. In Germany, we have a total of 83 works council members. You also asked about how many works council members do not have to perform their normal job because they are works council members. In Covestro, there are 31 such members. And then you asked about the 3 highest salaries amongst the works council members. And we understand you to be saying, what are the highest amounts paid to those works council members, who are free from their regular job to be Works Council members. In 2022, the highest total gross salary was EUR 198,900.57, followed by a total gross salary of EUR 168,955 and the third highest total gross pay was EUR 165,842. You then also asked about the amount spent on gifts in the year under review as well as the amounts for the 5 largest gifts. Gifts to external individuals without advertising amount was approximately EUR 25,000 overall. So 5 largest presents amounted to EUR 1,073. You also asked why despite making a loss, we are still paying into the performance-related entitlements. In Germany, we see that this is where the pension entitlements are based on agreements with the Works Council and a reduction in the entitlements is very difficult due to labor law. And in difficult years, there are further payments. We also see commitments by the company are always seen as performance-oriented commitments. The pension itself is determined by a defined contribution, which is calculated into a building block for your pension. The new hirees since the first of January 2021, there is no guaranteed pension simply a capital payment. [ Mr. Gable ], you also why impairments of EUR 245 million were taken for losses carryforward and how we determine this amount. You are refer -- I would like to refer you to our annual report where we mentioned an amount of EUR 1.202 billion. The annual report gives you an amount of EUR 1.202 billion. These are loss and interest carried forward for a period of more than 5 years. And then based on tax requirements, we're talking about taxable income, but not a tax amount. The amount of EUR 245 million of deferred taxes in Germany would then have to be impaired in accordance with the International Financial Accounting Standard, IFRS, because we're talking here about an amount of EUR 1.202 billion for the losses carried forward within an appropriate period of time of 5 years. [ Mr. Gable ], you asked about a decline in insurance payments in 2022 and why these went down from EUR 43 million to EUR 28 million. Not all of the insurance payments are recorded in other expenses. Some of the insurance payments are also included in various functional costs. These also include -- and we see EUR 52 billion for insurance payments compared to EUR 51 million the year before. So they are basically at the same level as in 2021. [ Mr. Gable ], you also asked about insurance premiums that we received in 2022 and other operating income is where we -- where we record insurance premiums, and this is also used to cover Covestro's own risks. And we're not talking about reimbursements for claims. These premiums increased by 20% to EUR 36 million as a result of developments on the market. And with that, I'd like to hand over to Sucheta Govil.

Thank you, Thomas. [ Gable ], you asked about our activities and our business with Russia. Relatively shortly after the outbreak of war in Ukraine, we at Covestro decided not to supply any more products to Russia. And with the fifth EU sanctions package at the latest, many chemicals were also covered actually by this export ban. Consequently, Covestro also discontinued its business activities with Russia in the fiscal year 2022. In previous years, actually, this has accounted for less than 1% of group sales. And the Covestro company, which was actually a sales support office in Russia was also liquidated in the process. Thank you. And with that, I hand over to questions here.

[ Mr. Gable ], you asked about the conditions for the pension entitlements amounting to EUR 126,750 for Dr. Schäfer. With regard you also asked about the terms and also the age requirements and whether other income would be considered. We're talking here about an entitlement from the [ Bayer ] system, which was vested by him. And as of the time he leaves the company as of the 1st of July 2023 these can be paid out at the request of Dr. Schäfer. At that point in time, he will have completed his 60th year and that there is no there were no conditions attached. With regard to the compensation for the members of the Board of Management, I'd like to mention that we review the appropriateness of their compensation by annual benchmarks with a group of peer companies. These benchmarks show on a regular basis that a compensation package including the pensions for our members are appropriate. And so the majority of the DAX and MDAX companies, the members of the Board of management received payments for their pension in various different forms. You asked about the changes on the Board of Management at Investors, you really can't talk about an exodus. Dr. Schäfer extended his contract by 6 months to have a smooth transition for his successor, and then he will be retiring, which she deserves. Dr. Toepfer will be leaving for personal reasons. He is switching over to Airbus. [ Mr. Gable ] you also asked about 2022, you talked about payments from the Prisma tranche and you asked for a comment on the amounts for or information and amounts for the pension entitlements. Here we're talking about Prisma, which is a long-term compensation based on 4 years. And the last Prisma tranche that was just paid out is based on the years 2019 through 2022. So that would be not enough just to deal with fiscal 2022. And the payments made for these pension entitlements are the result of contractual obligations vis-a-vis our Board of Management members and for all of our employees, it does not depend on the specific business situation. [ Mr. Gabel ], you refer to our compensation very complicated and nontransparent. You asked about the number of workers and employees, who work on that. You also asked if employees and Board of Management couldn't be paid by a simple system. In our HR department, we have 2 employees, who work on the system used for the Board of Management Compensation. You say that it's too intransparent too complex. We can't understand that especially since other investors, who spoke before you gave us positive feedback. The system used for employees and the Board of Management, the various components, fixed salary, short and long-term variable compensation, fringe benefits as well as pension is when something that is perfectly normal on the market. Variable compensation, which is linked to a significant share of the compensation based on the corporate performance is something, which is also required by The German Corporate Governance Code for members of the Board of Management. [ Mr. Gabel ], you asked about severance paid bonus, continuous payment, et cetera, after Dr. Toepfer with regard to contract until the 31st of August 2023, he will be receiving his fixed compensation pro-rata and the mobility allowance, which we paid both we paid monthly as well as monthly expenditures for Covestro AG and for his pension. He also participates in the compensation program in fiscal '23. And in April of next year, he may receive a payout as soon and this applies to the other members of the Board of Management as well as soon as the requirement -- if the requirements are met. The claim for pay out from the long-term compensation program, Prisma, will not apply to all of the transfers for the year beginning for the judge, beginning with 2020 and for later years. And in according with the plan. That is why this will not be the case. Thank you very much to our colleagues as well as for your answers. And that brings us to the next round of questions. And I'd like to look at the screen. The next speakers will be in the following quarter. [ Mr. Matthias ] XXXXXXXXXXXXXXX and Mr. Ulrich XXXXXXXXXXXXXXX, our technical team would like those individuals to please go to the investor portal and go for your technical test. So I'm going to interrupt now hopefully only for about 5 minutes, and then we will continue with the questions. Thank you. We're going to take a break now. See you in just a minute. [Break]

Ladies and gentlemen, we continue our AGM now. And our next speaker is [ Mr. Matthias Gabler ]. [ Mr. Gabler ], please.