Brenntag presents good results and announces major acquisitions
Brenntag achieves good results in the third quarter of 2015. Gross profit and operating EBITDA exceeded the previous year’s figures. In the context of the continuing low demand from customers in the oil & gas industry and a slowdown in the economic climate particularly in North America, growth was lower than earlier this year.
In the third quarter of 2015, at 2,607.5 million EUR Brenntag’s sales were at the same level as in the previous quarter (+0.8% as reported). The company’s gross profit – which is important for an assessment of its earnings performance – rose by 9.6% (as reported) to 570.5 million EUR (+1.2% on a constant currency basis). Operating EBITDA increased by 7.5% on the previous year (as reported) to 204.4 million EUR (-2.0% on a constant currency basis).
Brenntag’s profit after tax amounted to 94.7 million EUR in the third quarter of 2015. This represents earnings per share for Brenntag’s shareholders of 0.61 EUR, which is higher than the figure of 0.56 EUR for the same quarter in the previous year.
Free cash flow amounted to 191.0 million EUR in the third quarter of 2015 which is a significant increase by 37.7 % on the previous year’s free cash flow of 138.7 million EUR.
Steven Holland, Chief Executive Officer of Brenntag AG, comments: “The overall economic environment remains challenging with a number of factors affecting underlying demand in all regions. We were able to report strong results within Europe, Latin America and Asia Pacific. They all contributed to growth in the third quarter 2015. Results in North America were impacted by continued weakness in oil & gas. An additional loss of momentum in the macro economy limited our ability to compensate this through the business in other customer industries. In an expansion to our existing distribution business, we announced today two major acquisitions, G.H. Berlin-Windward and J.A.M., both leading distributors of lubricants in North America. These acquisitions increase the level of product and customer diversity and at the same time counteract the weakness in our North American oil & gas earnings. Full year EBITDA earnings for the new acquisitions in 2016 are expected to be over 50 million USD.”
Europe realizes further growth
In the third quarter of 2015, Brenntag Europe realized an operating gross profit of 255.1 million EUR, an increase of 5.0% on the same quarter in the previous year (+3.5% on a constant currency basis). The operating EBITDA rose by 3.7% to 87.2 million EUR (+2.1% on a constant currency basis). In the context of the lack of macroeconomic growth momentum, this is a good performance which confirms Brenntag’s strong positioning in Europe.
North America impacted by low demand from the oil & gas industry
The company’s earnings in North America were strongly affected in the third quarter due to the continuing weak demand from the oil & gas industry on account of the low price of oil. In addition, Brenntag North America in total registered a slightly weaker level of demand than in the first half of the current year. Its operating gross profit rose by 13.8% to 240.9 million EUR (-3.0% on a constant currency basis). Its operating EBITDA amounted to 95.7 million EUR, which corresponds to an increase of 7.6% (-9.0% on a constant currency basis).
Ongoing strong growth in Latin America
Despite a persistently difficult economic environment in several countries in the region, overall Brenntag Latin America once again realized very strong earnings growth: Its operating gross profit was at 50.5 million EUR 15.0% higher than in the same quarter in the previous year (+11.3% on a constant currency basis). Its operating EBITDA also grew significantly, by 24.2% to 15.4 million EUR (+25.0% on a constant currency basis).
Positive trend for Asia Pacific
In the third quarter, Brenntag Asia Pacific realized a very strong performance – despite the slowing of momentum in China – and thus maintained the positive trend of the first half of the year. Its operating gross profit rose by 12.8% to 34.4 million EUR (+2.6% on a constant currency basis). Its operating EBITDA reached 12.1 million EUR, which represents growth of 19.8% (+8.8% on a constant currency basis).
Major acquisitions strengthen Brenntag’s strategic market position
In North America, the company will significantly expand its position in the very attractive lubricants market by acquiring the two leading distributors G.H. Berlin-Windward and J.A.M. The enterprise value for both companies amounts to 440 million USD. Furthermore, Brenntag executed several strategic acquisitions, most recently in Turkey (Parkoteks Kimya San.), the Middle East (Trychem FZC) and Southeast Asia (TAT Group). With these acquisitions, Brenntag continues to strengthen its global footprint.
Outlook 2015
With respect to the EBITDA guidance Brenntag takes a more cautious view for the rest of the year to reflect the overall macroeconomic conditions. Brenntag expects an operating EBITDA for the Group between 790 and 810 million EUR, about 5% lower than the initial guidance but significantly above previous year's figure of 727 million EUR.
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