Brenntag: Weather the storm

// By Alex Roberts on 12 Nov 2019
Brenntag: Weather the storm

Brenntag has announced plenty of news in recent weeks, including an acquisition in Brazil, change at the top and steady third-quarter results

It has been a busy year for Brenntag and things have not slowed down in the third quarter. The German heavyweight in chemical and ingredients distribution has expanded its reach in Latin America, increased distribution agreements across Europe, the Middle East and Africa (EMEA) and has also announced a new CEO.

Focusing on international expansion, Brenntag acquired Brazilian industrial and specialty chemicals distributor Quimisa and its logistics subsidiary Quimilog. Quimisa, headquartered in Brusque and with 2018 sales of €60.8m, supplies regional and international clients with industrial chemicals and a wide range of specialty chemicals including textile auxiliaries, dyes and polymers for the textile, household, food and beverage and paper industries.

“The acquisition of Quimisa is an attractive investment with a strong infrastructure which will allow us to increase our market position in Brazil,” says German Torres, CEO for Brenntag Latin America. “The location of its facilities in the states of Santa Catarina, Paraná and Rio Grande do Sul and its business model enhance our abilities to support the textile and household chemicals industries.”

Rogeiro Wehmuth, general manager for Quimisa and Quimilog, says of the acquisition: “I am proud to join the market leader in chemical distribution in Brazil and be part of a solid team that will combine the strengths of both organisations to capitalise market opportunities.”

Anthony Gerace, managing director for mergers and acquisitions at Brenntag Group, is equally optimistic about the venture: “This acquisition will expand our capabilities and service offering in Brazil. The combination of Quimisa’s market position in southern Brazil with Brenntag’s market reach and expertise will benefit our customers and supply partners across the Brazilian market.”

EYES ON EMEA

In the EMEA region, Brenntag has for several years been successfully distributing Corbion’s products throughout various industries across several countries in the EMEA region. Brenntag and Corbion have now strengthened that long-time partnership with an enhanced framework agreement providing an innovative way of working together.

Both Corbion and Brenntag agree that collaboration between companies that can ensure the highest levels of product development and service expectations is essential in being able to succeed in today’s markets. Due to this, the cooperation between the two entities is seen as highly beneficial, particularly as Brenntag hosts an incredibly wide portfolio and Corbion provides highly versatile solutions for diverse applications.

“The industry is fast moving, and so are Brenntag and Corbion,” says Marco Bootz, regional vice-president EMEA at Corbion. “We are trusted partners for our customers and with our fermentation capabilities we can create relevant sustainable solutions enabling our customers to have great tasting and safe products in the market.”

This view is complemented by Uwe Schueltke, COO for Brenntag EMEA: “Our business teams will work together in a way which goes beyond traditional distribution, with the aim to service manufacturers to the optimum. Brenntag fully supports Corbion’s strategy to develop sustainable solutions for today’s and future industry needs. We are very happy to take our relationship with Corbion to the next level with this new agreement.”

Corbion is a market leader in lactic acid, lactic acid derivatives, emulsifiers, functional enzyme blends, minerals, vitamins and algae ingredients.

FRESH PERSPECTIVE

Looking internally, Brenntag’s supervisory board has picked Christian Kohlpaintner as the company’s new CEO. Kohlpaintner is set to assume the position on 1 January 2020 on the retirement of current CEO Steve Holland. Kohlpaintner has held a number of senior management positions and arrives at Brenntag from Clariant International, where he has been a member of the executive committee.

 “With Christian Kohlpaintner we have been able to place as our new CEO an internationally experienced business leader with a proven track record,” says Stefan Zuschke, chairman of the supervisory board of Brenntag. “He has demonstrated impressively that he can lead and develop major business divisions and companies successfully. It will be his mission to lead Brenntag to sustainable growth and expand the market leadership further. It will also be about breaking new ground while at the same time preserving the core of the successful business model.”

Christian Kohlpaintner says of his appointment: “I am looking forward to my new role at Brenntag and the opportunity of working with my colleagues on the management board and the whole Brenntag team. Brenntag is a very healthy company which is ideally positioned in the chemical value chain.”

This also marks the end of an era for Brenntag with Holland stepping down after almost 14 years with Brenntag, the last eight years as its CEO. Zuschke says: “The supervisory board would like to thank Steven Holland. Steven’s vision and leadership have driven the company’s growth and success in a dynamic and challenging environment. We sincerely thank Steven for his contributions and for developing the company into the leading position that Brenntag holds in the market today. The supervisory board wishes him all the best for the future.”

NO CHANGE

Brenntag’s third quarter financial results reflect a “still-difficult market environment”, but things are looking stable with the numbers being on par for 2018’s results. “Since the beginning of the year, the market environment has continued to turn down. This negative trend affected us again in the third quarter, impacting adversely on our operating activities, particularly in the two large regions EMEA and North America,” says Holland. “Despite this environment, we were able to achieve stable results at group level thanks to our highly diversified product range and industries served by our global network.”

Operating EBITDA was flat at €262.8m, while after-tax profit rose from €110.5m last year to €128.4m, despite a 1.4 per cent decrease in overall sales. The main problem has been that the EMEA and North America markets continue to show weak demand and low economic impetus. EMEA provided a 0.1 per cent increase in operating gross profit from the year prior at €285.5m, while North America posted a slightly more positive 5.0 per cent increase in operating gross profit on a constant currency basis to €318.7m.

The volatility of markets is still disruptive in Latin America, but there has been solid growth recently and operating gross profit rose 3.5 per cent to €44.5m. However, Brenntag was not able to continue the strength of growth rate in the region seen at the beginning of 2019.

More positively, the Asia Pacific region posted good growth, continuing the performance from operating activities over the course of the year. Regional acquisitions made a productive contribution and operating gross profit rose by 13.6 per cent to €68.1m. Operating EBITDA in Asia Pacific was up by 34.9 per cent on the prior-year figure to €25.3m.

In July, Brenntag said it expected operating EBITDA growth for 2019 to be between 0 per cent and 4 per cent. Brenntag now expects growth to be at the lower end of this prediction. “The current situation and earnings trend in our regions and the annual forecasts for global economic performance confirm that we are right to take a cautious view of the economic situation over the coming months,” says Holland. “Macroeconomic conditions are not expected to show any improvement. In this challenging environment, however, we continue to demonstrate resilience. This has already been in evidence in the first nine months of the year, where we have achieved stable results.”

www.brenntag.com

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