Ladies and gentlemen.
Good morning, first of all. As Chairman of the Supervisory Board at Covestro AG, and as a result, Chairman of the Annual Shareholders Meeting, I call the Fourth Regular Annual Shareholders Meeting to order. On behalf of the Supervisory Board and the Board of Management, I would like to welcome all shareholders, as well as shareholders' representatives and representatives from the media. All members of the Supervisory Board are present here at today's Annual Shareholders Meeting, all members of the Board of Management as well. I'd also like to welcome Dr. Marc Hermann, the Notary Public from Cologne, who will again be in charge of the notarized meeting of our shareholders' meeting. Ladies and gentlemen, I note that the shareholders' meeting has been called to order in due form and within the specified time limit.
In conjunction with the notice to the Annual General Meeting, everything was in time and in due form. Information on today's AGM can be found in our information sheet, which you will receive when you registered here today. If you did not receive an information sheet, please turn to the information booth in the foyer outside our meeting room, or you can also go to the speaker's registration desk. Please keep in mind the information in the attendance area on request for the floor, on the list of participants, on the voting procedure, and if you need to leave the Annual General Meeting early, as well as to granting proxies. This year, for the first time, we will be voting using tablets instead of the voting cards we've used in the past. The voting procedure is something that I will explain to you in detail prior to the vote.
Please remember that you should register your admission and voting cards at the accreditation booth. The agenda, as well as management's draft resolutions, are available in their full wording. You also have the documentation available at the information booth outside the meeting room, and you can also get copies of them. Requests for the floor should be submitted early to the speaker's registration desk up here in the front of the room. This meeting will be broadcast on the internet, and there will be recordings of the audio and video part, including the speeches from the members of the management board. The rest of the Annual General Meeting will not be recorded or transmitted. In the unlikely event that I have to ask you to leave the room for safety reasons, please follow the instructions of our safety staff. The exits are marked with green and white pictograms.
Ladies and gentlemen, this brings us to the agenda for today's meeting, and this is something that you received when you received your accreditation. We want to begin with agenda items one and two, and this includes the presentation of the financial statements and the reports, as well as the proposal for the use of distributable profit. I would also like to call out the remaining agenda items, agenda items three through seven. Ladies and gentlemen, before I hand over to Mr. Steilemann, who will be reporting to us on the state of the company, I'd like to show you a short film on Covestro.
Ladies and gentlemen, stockholders, I would also like to welcome you on behalf of the entire Board of Management of Covestro AG. Welcome to our Annual General Meeting. I'm delighted that you have come out to Bonn today. For me personally, this is a special day because it is my first AGM as Chairman of the Board of Management of Covestro. I would like to start by briefly talking to you about our performance over the previous financial year, tell you where we stand today, and also tell you about our strategy for a successful future. After this, our CFO, Thomas Toepfer, will present you the financial results for fiscal 2018.
Ladies and gentlemen, Covestro is on a long-term and profitable growth track. Since 2015, the year of our IPO, we have succeeded in continually increasing core volume growth and generating strong earnings.
We continue this trend during the last financial year too. Global demand for our products again remained unabated in 2018. Our customers find our solutions compelling, and the demand for innovative materials continues to grow. We also invested in future fields with strong growth and high margins for this region. Plus, our newly launched efficiency program has enabled us to take a key step toward even greater efficiency and effectiveness. However, you most probably also noticed that the market environment in 2018 was quite volatile. We had an outstanding start and an outstanding first half year. As it turned out, however, the market situation changed significantly in the fourth quarter. We were confronted with adverse effects and were compelled to adjust our guidance. The main reason for this was that the selling prices of certain products of importance to us declined faster and more severely than originally expected.
As you know, we already had substantial surplus demand in 2017, along with very good margins. It, therefore, was just a question of time for capacities to expand on the supply side as well. Compounding factors included rising raw material prices that we were unable to pass on, and one of the effects such as the low water level in the Rhine River. This combination put far more pressure than anticipated on our margins in the fourth quarter. Overall, however, and this is very important to me, Covestro remains well positioned and highly profitable. We can look ahead with confidence as we are also able to operate sustainably and successfully in this environment. Following a successful fiscal year 2018, we have solid foundations as we head into the upcoming phase. Because all in all, our 2018 results have once more reached an outstanding level.
We achieved 1.6% core volume growth despite an already very high capacity utilization and bottlenecks in supply due to limited shipping capacity on the River Rhine. Sales rose by 3.4% to EUR 14.6 billion. EBITDA at EUR 3.2 billion was only just below the 2017 record year and well above the long-term average. However, this reflects the fact that margins are beginning to normalize. The same applies to our free operating cash flow. At EUR 1.7 billion, it reached a robust level but was down by 9.4% as compared with the previous year. Our return on capital employed at 29.5% was likewise at a very high level. These strong results are a major success story despite increasing competition. At this juncture, I would therefore like, in particular, to thank those people who made this success possible. In 2018, Covestro's employees once again demonstrated an impressive level of commitment and motivation.
They were the ones who relentlessly drove Covestro forward. All this certainly cannot be taken for granted, especially in difficult market conditions. I wish to thank them for this achievement on behalf of the entire Board of Management. L adies and gentlemen, the fact that market conditions are changing was to be expected. This is why we reacted at an early stage. We wanted Covestro to also be prepared for this particular market phase. We are investing in profitable, high-growth business areas. We have introduced a program to become more efficient and more effective. We are also continuing to focus on innovative and sustainable product solutions for our customers. Covestro is also becoming more digital with solutions for distribution, research, and production. We actively manage our portfolio.
We want to make targeted and value-adding acquisitions and farm out marginal fields of business if they no longer match our portfolio. This also makes us less vulnerable to cyclical fluctuations. Thus, effective on April the 1st, 2019, we have increased our share in the joint venture DIC Covestro Polymer in Japan to 80%, further strengthening our global present business with thermoplastic polyurethanes. The acquisition complements the recent global expansion in Covestro's capacities at the New Martinsville in the U.S. and Changhua in Taiwan sites, where the expected annual production capacity for this business area has increased by 25%. And last but not least, we continue to develop the unique Covestro culture based on our three key values, namely of being curious, courageous, and colorful, a culture of professional and personal development.
These strategic areas of focus will enable us to succeed in creating value for you as shareholders of Covestro AG, even in a changed environment. Now, I would like to outline four of these areas of focus in more detail. The demand for Covestro products is growing, and in order to benefit from this growth, we are extending our capacities in a targeted fashion. Today's investments are the foundations for the value creation of tomorrow. For this reason, in 2018, we invested in particular in divisions with significant growth potential to drive forward our differentiation. These especially include MDI, CAS, and PCS. MDI is an attractive market with strong growth forecasts. This is why Covestro invested in expanding production at our Brunsbüttel location. At the same time, we adopted a resolution to make the biggest single investment in our entire corporate history.
We are investing around EUR 1.5 billion in a new world-scale facility for MDI in Baytown in the United States, and we are also investing in the production of key precursors. This will enable us to reinforce our cost leadership and to become more independent. In Shanghai, we are extending our polycarbonate production from 400,000 tons to 600,000 tons per year. Initial additional capacities will become available step by step by the end of this year. Moreover, we are focusing on our fast-growing and high-margin film production, in which we are investing at four sites worldwide. At the end of December, we held a groundbreaking ceremony for a new production line at Map Ta Phut in Thailand, and we will be investing EUR 100 million there. These specialty films are used for identity documents, for instance, smartphone casings and automotive interiors, making them simply indispensable in our daily lives.
Ladies and gentlemen, boosting capacities is one thing. Deploying them efficiently and effectively is another. We want to put every single euro invested to best use. We are pursuing that goal at several levels. On the one hand, we launched our comprehensive effectiveness and efficiency program in 2018. The aim is to make our organization more agile. At the same time, we want to cap rising operating costs and save around EUR 350 million a year by 2021. It centers on adapting our structures so we can respond faster and better to market requirements. We will achieve this, for instance, by pooling our distribution channels, standard businesses, and position ourselves cost-effectively in the process. In addition, we want to become even more customer-centric.
We will do so by making our customers the center of our actions and by optimizing our organizational workflows accordingly, as well as by making increased use of digital offerings. Last but not least, we will continue to maximize synergies in our portfolio. For instance, we will be setting up a centralized marketing department to consolidate our segment's marketing and communication functions. D ear shareholders, Covestro's success is based on offering our customers innovative and sustainable solutions. This is why demand for Covestro products is growing. We want to offer materials that are superior to and can replace existing ones. This is our recipe for success, and it's what we are going to follow steadfastly. The aspect of sustainability is becoming increasingly important in this regard, and it is a key driver of innovation.
This is why we rely on the Sustainable Development Goals of the United Nations for guidance, the SDGs. By 2025, 80% of our project-driven R&D expenditures should be contributing to these goals, and there is a simple economic logic behind this. Markets for sustainable products offer disproportionately high growth potential. They are being driven by megatrends such as climate change, increasing mobility, and urbanization. The average growth rate in the market for offshore wind power is expected to be about 15% a year. For hybrid and electric cars, the projected rate is as high as 25%, and for efficient LED lights, it is 12%. Apart from robust growth, these markets have something else in common. We supply all of them at Covestro. This is why innovation at Covestro is always sustainability-driven.
We are convinced that this will enable us to make our long-term contribution to an increasingly stronger circular economy over time. The more sustainable and recyclable materials we offer and use, the stronger the circulation. That is good for Covestro, for humankind, and for this planet. This finally brings us to a topic the significance of which cannot be overestimated by us either, namely digitalization. At Covestro, digitalization applies to all divisions and employees because I am convinced that everything that can be digitalized will become digital. This is why we continue to further expand our e-commerce platforms. In 2018, our flagship store was launched on the Chinese trading platform Alibaba. In addition, the Covestro Direct Store went live last month.
Our customers can now use this web platform to make business deals with a few mouse clicks round the clock, buying products in any number of volumes flexibly and securely. Our store, once again, reflects our aim to improve customer centricity, adjusting the shopping experience to their individual needs. Since 2018, a global team in research and development has been working on faster and more efficient application development with the help of high-performance computer systems. This is how we speed up research. What is more, we are building a platform for research data. This platform will make know-how accessible at all research sites across the globe, and this will increase the efficiency of R&D projects. Digitalization is also making progress in production. New software solutions allow us to ensure the availability of our plants and equipment more efficiently and at lower cost.
In the future, we wish to identify problems such as a faulty pump before they can occur. Notwithstanding all the benefits of digitalization, our primary focus is on humankind. After all, our employees are key to successful implementation. For this reason, all employees are enabled to use new digital tools and to further their own development thanks to digitalization.
Ladies and gentlemen, shareholders, setting the right priorities at the right time has been and still is the basis of our success. This is why we at Covestro are actively preparing for the future. We invest in high-return, high-growth business areas where you're becoming more efficient and effective. We bank on innovation and sustainable product solutions. We are becoming increasingly digital. We actively manage our portfolio, and we continue to develop the unique culture we have here at Covestro.
Following this overview of what is currently driving Covestro forward and what we ourselves are driving forward, I would like to hand over to Thomas Toepfer for a more detailed view of our figures for the 2018 fiscal year. Thank you, Thomas. The floor is yours.
Markus. Thank you, Markus. Ladies and gentlemen, I, too, would like to join Markus and welcome you cordially here today in Bonn. As you know, I've been a member of Covestro's Board of Management for about 12 months now as CFO, and I'm therefore especially delighted to address you here today for the very first time. Here, you can see that at group level we have a growth of 1.6%, and this was despite the fact that we had negative or restricted product availability as a result of the low water level of the Rhine River.
We also mentioned that in the fourth quarter, starting in the third quarter of last year, we also had a difficult market situation. That is why, despite all of this, we managed to come up with an excellent performance and were able to boost our sales to EUR 14.6 million, EUR 14.6 billion. EBITDA declined slightly to EUR 3.2 billion, but this is still, in absolute terms, a very high level and it corresponds to a very strong margin of 21.9%. You can see that the return on capital employed came in at 29.5%. This is slightly down from the previous year, but it still remains at an exceptionally high level as well. The same applies to the free operating cash flow on the right.
In 2018, we had a value of EUR 1.7 billion , and this is a slight decline, but in absolute terms, this is an excellent result. Overall, you can say that the results from 2018 did not match the record year 2017, but this was shaped by a special market situation. It was still a very strong year for Covestro nonetheless. This development was also reflected in our three segments. Here you can see the three segments: Polyurethanes, Polycarbonates in the middle, and on the right, Coatings, Adhesives, and Specialties on the right. I would like to note that in all three segments, we saw positive volume growth, and this has shown that demand for our products is indeed intact in all segments that we operate. If you look to the left, Polyurethanes, here you will see that we had a substantial normalization of earnings.
Sales remained constant and reached EUR 7.4 billion, and the volume growth was 0.8%. EBITDA, however, dropped to EUR 1.8 billion, which still corresponds to a strong margin of 23.9%, however, a decline compared to the previous year. In the middle, you'll see polycarbonates. Here in this segment, sales increased significantly to over EUR 4 billion with volume growth of 3%. EBITDA was also increased to over EUR 1 billion, which reflects a very strong margin of 25.6%, and on the right, you can see the coatings, adhesives, and specialties segment. Here we also had 2.5% volume growth. Sales increased slightly to close to EUR 2.4 billion, and EBITDA slipped slightly to EUR 464 million, but this still corresponds to a stable margin of 19.7%, so overall, you can see our group's success is driven by all three segments, in particular when it's a question of growth.
Now, these strong results are also reflected in a strong balance sheet. You can see that here, and this shows you our net debt from the end of 2017 on the very left to the end of 2018 on the right. And what's more important here, in the middle of the chart, you can see that, dear shareholders, in 2018, we paid out a large sum of money in the form of the dividends of about EUR 440 million, and we bought back shares totaling over EUR 1.3 billion in 2018. So that means that our free operating cash flow, which we generated in 2018, was paid back to you in these two forms: dividend and share buyback. Another thing you can see here is that our net debt from the left to the right has gone up slightly by around EUR 323 million to EUR 1.8 billion.
That was at the end of 2018. This, however, has to be seen where you take a look at the ratio of net debt to EBITDA, to 0.6. That is a very good and solid value, and the increase in net debt is due, in particular, to an increase in our pension provisions. These increased by EUR 258 million, which is due in part to the negative return on planned assets. This was a factor that we were certainly not alone with in 2018. Another thing that you don't see on this chart is that our equity ratio continued to improve in 2018. It went up to 49%, and it started at a very good value in 2017, which was 47%, so now I'd like to talk about our priorities when it comes to the use of our cash.
We have clear priorities, and you can see that the top priority is shown on the left of this chart. In other words, we are committed to a policy of at least a stable or rising dividend. And secondly, we are focusing on capital expenditures. That's the second pillar: CapEx investments. In other words, in long-lasting capital goods such as production facilities, because we're convinced that this is a basis for our future profitable growth of our group. We're also convinced that due to our market-leading position and cost leadership, we believe that we are able to generate value for you, our shareholders. We are focusing on all three segments, in particular coatings, adhesives, and specialties. We are also focusing on the product MDI in the polyurethane segment, and we're also focusing on the polycarbonates segment.
Logically, of course, we also invest in maintenance across the board to ensure that we can produce reliably, efficiently, and safely at all times. Thirdly, we also want to make use and will make use of our opportunities. That's why we take a disciplined approach to managing our portfolio. We want to make acquisitions where we can lever high margins, and at the same time, we want to differentiate our business. In addition, you know that our share buyback program was completed in the prior fiscal year. As you can see from the agenda to this annual shareholders' meeting, the Board of Management and the Supervisory Board have proposed authorization for a new buyback program for today's meeting for up to 10% of the capital stock by the 11th of April 2024. I have already talked about dividends.
As I said before, we continue to be committed to our policy of ensuring at least a stable or even a rising dividend. And as you can see here on this chart, since our independence, we have continually raised the dividend. And we also want to remain true to our policy in 2018 and are proposing a dividend of EUR 2.40 per share. This corresponds to an increase of 9% compared to 2017 and a dividend yield of about 4.5%, as you can see based on yesterday's Xetra closing price. So this means for 2018, we would pay out a dividend of around EUR 440 million. Ladies and gentlemen, on the next chart, you can see that one of our strengths is the high proportion of resilient, or in other words, increasingly more non-cyclical business.
This includes the CAS segment as a whole, but also business with polyols and some of our MDI business, as well as over half of our polycarbonates business. And as you can see the lower part of the chart, you can see that these business activities will enable us to generate a solid basic result in normal business conditions, an EBITDA of EUR 1.3-1.6 billion. Another factor here is the result of stronger supply and demand. And this share in 2017 and 2018 grew, and you can see that demand for these products grew faster than supply. That means that the impact on selling prices and margins were positive as well. And now, in the future, new capacities on the market, and Markus Steilemann mentioned that as well, will lead to increased supply.
And we mentioned this in the fourth quarter of 2018, and we believe that these effects will go beyond the year 2019. But this is even more important to note that Covestro is active in a difficult market situation, but it's able to earn its cost of capital. And this means that we, even in a difficult situation, can still generate value for you. So now, with my introduction to 2019, I'd like to come to the forecast for the current fiscal year. And I think if we look at the international economy, you can see some uncertainties. Trade conflicts are impairing imported industries, and especially here in Europe, there are immense Brexit-related uncertainties. This certainly is not helpful for economic development. If you look to chemistry in particular, you'll see that the German Chemical Industry Association forecasts that output will rise by just 1.5%.
That's why overall we expect our indicators to be slightly below the mid-cycle level. But, and this is important, the level of demand for our products remains intact in this environment and will continue. We expect in the first line, you can see for 2019, we expect core volume growth to be in the low to medium single-digit % range. And in the second line, you can see that we expect free operating cash flow of between EUR 300 million and EUR 700 million. And when it comes to return on capital employed, we expect a range of 8%-13%. And year-end EBITDA, that's the most important KPI for us, will probably be between EUR 1.5 billion and EUR 2 billion. In a shorter period of time, for the first quarter, we said we expect EBITDA to come out at roughly EUR 440 million.
The figures for the first quarter will then be published on the 29th of April. And finally, you can see this at the bottom of the slide. Planned investments will increase CapEx for full year 2019, an increase compared to 2018 that will be to more than EUR 900 million based on our investment strategy that I've mentioned already. Ladies and gentlemen, shareholders, allow me to recap what we've said so far. In 2018, despite a difficult market environment, we were able to report a strong performance, and it wasn't another record year like we had in 2017, but we were pretty close. In 2019, we expect results to temporarily fall below the average level of the cycle, but in the long run, we believe that growth in our buyer markets will exceed that of our global gross domestic product.
And at the same time, we are driving efficiency and effectiveness so that Covestro can continue to operate very profitably in all types of markets. That's why we're focused on profitability, and in the medium term, we expect sustainable EBITDA of over EUR 2 billion. And for this reason, we set the stage for increased strategic focus that was begun in 2018. We're continuing this in 2019. So we can say that Covestro is well prepared for the future and well equipped for continuing on our long-term success story. So that brings me to the end of my presentation, and I'd like to thank you very much for your attention.