Covestro raises forecasts thanks to margin improvement

BERLIN (Reuters) -German plastics group Covestro AG on Tuesday raised the outlook for its profit, cash flow and return on capital this year on the back of an improvement in margins at its core operating business.

Earnings before interest, taxation, depreciation and amortization (EBITDA) are now expected to be between 2.2 billion and 2.7 billion euros ($2.6-$3.2 billion) in fiscal 2021, up from an earlier forecast of 1.7-2.2 billion euros.

The improved outlook reflects higher product prices and margins, mainly in its main businesses - transparent polycarbonate plastics as well as chemicals for insulation foams and upholstery foams.

Free operating cash flow was forecast at 1.3-1.8 billion euros, up from an earlier view of 900 million to 1.4 billion euros, while return on capital employed is now seen at 12%-17% compared to 7%-12% previously.

Covestro released its revised forecast under stock exchange rules requiring listed companies to update the market when performance diverges from expectations.

The company reported preliminary first-quarter EBITDA at 740 million euros and forecast EBITDA in the second quarter at 730-870 million euros. It will report full first-quarter results on April 28.

($1 = 0.8374 euros)

(Reporting by Douglas BusvineEditing by Madeline Chambers)