Good Start for recently established global Divisions of leading Distribution Group

Global chemical distributor Brenntag SE (Essen, Germany) has published the Q1-2021 results yesterday. Despite a marginal decline in sales to EUR 3’132.5 mn (down 2.5% from EUR 3’211.3 mn as reported, or +2.7% on a constant currency basis), the group is showing increases in Operating Gross Profit of 1.8% (7.4% on  a constant currency basis) from EUR 750.7 mn in Q1-2020 to EUR 764.5 mn last quarter and Operating EBITDA of 14.2% (20.7% on a constant currency basis) from EUR 263.0 mn in Q1 of the previous year to EUR 300.3 mn.

Profit before tax was down 10.8% at EUR 139.3 mn, Profit after tax down  12.9% at EUR 100.2 mn. This results in earnings per share attributable to Brenntag shareholders of EUR 0.63 per share (down from EUR 0.74 per share in Q1-2020). The reduction was mostly caused a “non-recurring, extraordinary increase in provisions related to a tax audit concerning past handling of alcohol taxes”, Brenntag said in the announcement.

Working capital increased by 14.8% to EUR 1’545.8 mn (up from EUR 1’346.6 mn at the end of  2020) mostly driven by an increase in Trade Receivables. At a level of EUR 75.6 mn, free cash flow was down significantly from the EUR 161.5 mn realised in Q1-2020.

With this quaterly set of data Brenntag for the first time provided feedback on the performance of the new global divisions, Brenntag Essentials and Brenntag Specialties that represent the the destinct market aproach the company switched to effective 01. January 2021.

Brenntag Essentials had what the announcement described as “outstanding results”, with an Operating Gross Profit of EUR 472.5 mn, up 1.4% as reported or +7.1% at a constant currency basis. This resulted in an Operating EBITDA of EUR 194.1 mn (representing 64.4% of the total in Q1-2021), up 22.6% as reported or +29.2% on a constant currency basis. Brenntag said that “all regions contributed to the positive performance … , with North and Latin America as well as Asia Pacific being particularly strong. EMEA showed slightly weaker growth rates compared to the very strong development of the recent quarters.”

Brenntag Specialties, which is focusing on six selected customer industries: Nutrition, Pharma, Personal Care / HI&I (Home, Industrial & Institutional), Material Science (Coatings & Constructions, Polymers, Rubber), Water Treatment and Lubricants, had an Operating Gross Profit of EUR 284.3 mn, up 1.7% as reported and +7.1% and a constant currency basis, resulting in a reported Operating EBITDA of 119.8 million EUR (+3.5% or + 9.2% on a constant currency basis. Here the regions EMEA and Asia Pacific showed a particularly strong performance across all industries, Brenntag said.

With the split into two global divisons, the implementation of Project Brenntag has made good progress so far, the statement said. Designed to be a comprehensive transformation program, it has the main objectives to “expand Brenntag’s position as global market leader and position the company for sustainable organic earnings growth.” Step-by-step implementation of the program’s initiatives is underway and more than 50 of the around 100 site closures have already been completed to date. Since the initiation of the program, around 350 jobs have been reduced, out of approx. 1’300 planned over two years. Brenntag said it is using natural fluctuation, mutually agreed separations, and regular and early retirement schemes in order to realise the adjustments in a socially responsible manner.

Brenntag also said that the actions regarding crisis management remain in place as have proven to be effective. The company has successfully limited the impacts of the pandemic on its business and protected the health and safety of its employees and business partners.

Against the backdrop of a continued challenging environment and the results of Q1, Brenntag said it confirms its Operating EBITDA guidance to be in the range of EUR 1’080 to 1’180 mn for the full year, with both global division expected to contribute.

Source: Brenntag press release and quarterly report; DistriConsult analysis

HGE – DCG / 12.05.2021