The Story Behind Covestro's Global Success

We conducted an engaging interview with Dr. Martin Merkens, responsible for Sales and Market Development in the Coatings, Adhesives, and Specialty Products segment of Covestro in Europe, the Middle East, Africa, and Latin America. Merkens shared Covestro's success story with us in the global arena. [caption id="attachment_123829" align="aligncenter"] Dr. Martin Merkens[/caption]  

Could you briefly tell our readers about yourself, your education, and your professional background in the industry?

I am a chemist with a doctorate and also have a background in economics. I have been working at Covestro (formerly Bayer) for 20 years in the field of paints and coatings raw materials. I have held various positions encompassing sales, application development, and product management responsibilities. As of February 2020, I serve as Director responsible for Sales and Market Development in the Paints, Adhesives, and Specialty Products business unit for the Europe, Middle East, Africa, and Latin America region.

Could you tell us about Covestro's development process from its founding to today?

Covestro was founded in 2015. As of 2018, it is listed in the German DAX 30 stock exchange index. Its predecessor company, Bayer MaterialScience (and before that, Bayer), discovered polyurethane chemistry and obtained a patent for it in 1937 (Prof. Otto Bayer).

What are Covestro's products and product groups? Which industries does it serve?

Our operations are currently managed by three business units: Polyurethane, polycarbonate, and paints, adhesives, and specialty products. Covestro's Paints, Adhesives, and Specialty Products division develops and supplies materials that make end products more attractive and durable, increase their value, and provide a special final touch. At the same time, our materials typically deliver increased productivity through shorter curing times, faster processing, or reduced solvent requirements. What sets this business unit apart in competition is its distinctive business approach: We develop our solutions together with our customers throughout the entire value chain to make the world a better place.

Could you tell us about your sales activities? Which regions do you primarily sell to?

Our headquarters is located in Leverkusen, Germany, in the Rhineland region, one of the leading chemical industry areas in Europe. We operate globally in four regions: North America, Latin America, Asia-Pacific, and Europe, Middle East, Africa. This allows us to be close to our customers and serve regional supply chains and environmental regulations. As a global player, Covestro maintains a strong network of production facilities.

In your opinion, what are the conditions for being a manufacturer in the global arena?

Covestro operates approximately 30 production facilities in Europe, Asia, and the United States. These range from smaller facilities designed for regional purposes that provide efficient and reliable supply to customers through our global presence, to world-scale plants. Continuous technical optimization of our production base is a high priority for us. Our facilities set standards in terms of quality, productivity, and safety. Covestro's major production facilities are: Baytown (USA), Map Ta Phut (Thailand), Shanghai (China), Antwerp (Belgium), Brunsbüttel (Germany), Dormagen (Germany), Krefeld-Ürdingen (Germany), and Leverkusen (Germany). Additionally, we maintain technical centers and innovation centers worldwide to be as close as possible to our customers.

May I learn about your after-sales service and customer satisfaction philosophy?

"Customer Focus" is a corporate philosophy that places customer needs at the center of everything our company does. All activities and processes of the organization are evaluated from the customer's perspective. Therefore, our customers' expectations and needs are the starting point for everything our company commits to. At Covestro, "Customer Focus" is based on three pillars: Know the customer: Always put the customer first by making customer views and customer needs visible. Think customer first: Provide a customer-focused approach in all company areas and functions. Create Customer Value Together: Use customer feedback as a starting point to create added value for our customers.  

"We develop our solutions together with our customers throughout the entire value chain to make the world a better place."

  We closely monitor developments through collaboration with our customers and maintain continuous communication with them through our communication channels. As the COVID-19 pandemic has progressed, we continuously adapt to our customers' needs and the realities of the market situation. We conduct an annual customer satisfaction survey based on Net Promoter Score (NPS) methodology and have achieved the highest scores in the chemical industry. Have you developed innovative products that will make a difference in the coatings field recently? Covestro covers four main industrial sectors: Automotive, construction, industrial coatings, and industrial adhesives. Turkey is an important market in the industrial coatings sector due to its large wood and furniture industry. We carry out continuous product launches throughout the year. For example, let me share three products related to the wood coatings market: Bayhydur® eco 701-90 – partially bio-based: Contains 61% renewable carbon derived from biomass. Chemically resistant: Withstands changes from internal and external factors. High performance: Offers the same smoothness and durability as traditional fossil-based coatings. Low carbon footprint: Significantly reduces cradle-to-gate carbon footprint compared to HDI derivatives. Bayhydrol® eco UV 2877 – a multi-cure, partially bio-based polyurethane dispersion. In addition to conventional UV curing, it also has self-oxidative cross-linking capability. This provides higher process safety in shaded areas or in cases of inhibition due to UV absorption from pigments, because it enables coatings to achieve exceptional resistance and hardness even in areas that receive little or no UV light. Additionally, thanks to its faster drying properties, this product can accelerate the coating process by up to 50%. With Bayhydur® quix 306-70, Covestro offers a hydrophilic isocyanate hardener for 2K water-based polyurethane wood coatings that cure as quickly as 2K solvent-based (SB) systems and up to 60% faster than standard water-based (WB) coatings. Furthermore, a recent life cycle assessment (LCA) study showed that Bayhydur® quix results in a smaller CO2 footprint compared to 2K WB and SB PU systems without compromising its advantageous properties.

Advancing technology and digitalization are offering innovative opportunities to many sectors. What are your digital transformation initiatives as Covestro?

Digital Communication – Covestro Direct Store, Covestro's digital B2B commerce platform supported by Asellion, allows customers to conduct business around the clock and purchase products conveniently, flexibly, and securely through a digital sales channel. Covestro is also active across all digital channels and we encourage our customers to use this option. Covestro Solutions Center, through the information it provides on our entire portfolio, enables customers to compare products side by side or request samples. Through our digital ordering platform Order@Covestro, customers can submit orders, track them, and receive important alerts or notifications regarding delivery status. Digital Operations – Covestro also actively manages digital technologies and processes in research and development (R&D). Investments in expanding the company's computing capacity are a central element. The powerful computing hub for digital research is located in Leverkusen and this center will be continuously expanded in the coming year. The planned hardware expansion will significantly increase computing power through high-performance computing and thus digitally support R&D activities worldwide. Additionally, Covestro collaborates with competent partners such as RWTH Aachen University. Digital Business Models – Covestro works in close collaboration with other pioneers in various industry sectors to expand available material types for digital printing and 3D printing. In this way, our expertise helps bridge the gap between innovative printing methods and their application in series production. We can cite the use of thermoplastic polyurethane for laser sintering as an example.

What new decisions have you made while managing the pandemic process? Do you have any activities in this scope?

Since the beginning of the crisis, Covestro has continuously monitored the situation's development and has given the highest priority to protecting employees and their families worldwide. Additionally, the company has implemented a series of direct measures in recent months to provide local support to health and care facilities. The safety of our employees and customers is our highest priority. We have taken strict health measures at all our centers to comply with local regulations. We have taken action to provide stable supply and technical support, which has been positively received by our customers.

Could you tell us about your R&D and sustainability initiatives?

With the goal of making the world a better place, Covestro develops products and solutions that push the boundaries of what is possible. We also ensure that this conviction is deeply embedded in our sustainability understanding. We align our research and development projects (R&D) to address the United Nations Sustainable Development Goals. By 2025, 80 percent of our R&D project spending will be targeted at areas that contribute to achieving these goals, either undertaken through partnerships or approved by recognized institutions. Covestro is committed to making the circular economy a truly sustainable world model. To this end, we want to adapt our entire production and product range to the circular concept and ultimately become fully circular. This strategic vision is being implemented gradually through numerous concrete measures and projects. In this way, we want to accelerate the transition to the circular economy, particularly in the chemistry and plastics industries, and contribute to the goal of a greenhouse gas-neutral economy.

In particular, we aim to transform our production facilities worldwide to alternative raw materials and renewable energy. Additionally, as Covestro, we are exploring new paths for more and better recycling through more than 20 projects.

We are driving change through four strategic pillars: Alternative raw materials: Biomass, CO2, as well as end-of-life materials and waste replace crude fossil raw materials such as oil; carbon circulation is performed. Innovative recycling: Energy-efficient new technologies enable more and more effective recycling of end-of-life materials and waste. Collaborative solutions: To advance the circular economy, Covestro continues cross-sector collaboration. Renewable energies: The circular economy is truly sustainable only if electricity from alternative sources is used.

On 30 September 2020, Covestro announced it was in the process of acquiring DSM's leading sustainable coating resins business unit, which makes Covestro one of the global leaders in the growing market for sustainable coating resins.

We are combining our strong innovation capabilities to accelerate the transition to the circular economy. A complementary product portfolio including highly specialized, market-leading products used in different industries such as paints, packaging, and fiber coatings, and end-use industries are positioned in perfect alignment to meet customer needs. This also includes proprietary manufacturing technology for VOC-free adhesives and fully recyclable carpet, mattress, and furniture components. This acquisition contributes to Covestro's digital transformation by also providing additional performance materials and application expertise in 3D printing and high-performance anti-reflective coatings for solar panel markets. The acquisition will generate EUR 1 billion in sales and EUR 141 million in EBITDA. The EUR 1.61 billion acquisition reflects an impressive enterprise value assessment of 5.7x EV/EBITDA 2021, including future synergies. This represents significant synergies of approximately EUR 120 million annually.