Brenntag Delivers Strong Results and Cash Flow in the 3rd Quarter of 2011

10 Nov 2011

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In the light of the positive business development and the strong results in the first nine months of this year, Brenntag confirms its forecast for its full-year operating EBITDA.

Nov 10 2011 --- Brenntag the global market leader in chemical distribution, reported strong results in the third quarter of 2011. Sales increased by 13.6% based on constant exchange rates (9.7% as reported) to EUR 2,218.0 million (Q3 2010: EUR 2,022.6 million). More importantly, Brenntag’s gross profit*, one of the key performance indicators, reached EUR 445.5 million (Q3 2010: EUR 429.7 million), which corresponds to a currency adjusted growth rate of 7.7% (3.7% as reported). The second key performance indicator, operating EBITDA, improved by 8.6% based on constant exchange rates (3.9% as reported) to EUR 166.6 million (Q3 2010: EUR 160.3 million). Brenntag’s profit after tax amounted to EUR 66.7 million (Q3 2010: EUR 43.3 million) in the third quarter, reflecting a growth rate of 54.0%. Equally strong, earnings per share grew from EUR 0.79 in previous year’s quarter by 64.6% to EUR 1.30 in the third quarter 2011. All regions reported earnings growth with the exception of Europe, which delivered earnings about at the level of the third quarter 2010 against the background of weakening macro-economic growth in Europe. Also, nine-month 2011 figures were consistently strong and support the full-year expectations for 2011.

Steven Holland, CEO of Brenntag AG: “Our strategy is to position the company in higher growth markets and industries whilst at the same time building in resilience. We were able to grow our main earnings parameters while at the same time successfully delivering on our acquisition strategy with the acquisitions of Zhong Yung and Multisol Group. Thereby in the third quarter, which for many of our investors has been dominated by events outside of Brenntag with significant volatility in stock markets around the world, continuing issues around sovereign debt in the Euro-zone and fluctuation in the value of the US dollar, our strategy allowed Brenntag to balance its performance as a whole.”

Nine months results

Compared to the first nine months of 2010 Brenntag’s sales increased by 16.5% based on constant exchange rates (14.2% as reported) to EUR 6,518.5 million (previous year: EUR 5,710.2 million). Gross profit reached EUR 1,323.7 million (previous year: EUR 1,225.9 million), growing by 10.5% based on constant exchange rates (as reported: 8.0%). Operating EBITDA came in at EUR 492.4 million (previous year: EUR 447.6 million) and thereby increased by 13.2% based on constant exchange rates (10.0% as reported).

Flat earnings in Europe against a slowdown of macro-economic growth

Brenntag Europe felt a slight weakening of demand trends in the third quarter. Nevertheless, operating gross profit increased from EUR 218.2 million in the third quarter of 2010 by 1.7% based on constant exchange rates (1.5% as reported) to EUR 221.5 million in the third quarter of this year. Operating EBITDA in the third quarter of 2011 marginally fell by 0.3% at constant exchange rates (0.8% as reported) from EUR 75.7 million in the third quarter of 2010 to EUR 75.1 million in the reference period of this year. Brenntag will expand its geographic presence in Europe as well as in Africa by acquiring specialty chemicals distributor Multisol Group Limited. The acquisition will further enhance Brenntag’s market position in the distribution of specialty chemicals with a focus on lubricant additives and base oils including mixing and blending capabilities. The acquisition is expected to close later this year after receiving the mandatory anti-trust clearance.

North America remains strong

Brenntag North America remained on its strong growth path in the third quarter of 2011. Operating gross profit grew by 11.8% based on constant exchange rates (3.1% as reported) from EUR 165.6 million in the third quarter of 2010 to EUR 170.8 million in the corresponding period of this year. Operating EBITDA reached EUR 74.8 million in the third quarter of 2011 in comparison to EUR 72.2 million in the third quarter of the previous year. This corresponds to a growth rate of 12.3% if adjusted for exchange rate effects (3.6% as reported).

Latin America highly positive

Brenntag again reported convincing results in the Latin American segment in the third quarter of 2011. Operating gross profit increased from EUR 34.7 million in the third quarter of the previous year to EUR 37.4 million in the third quarter of 2011, corresponding to a currency adjusted growth rate of 15.7% (7.8% as reported). Operating EBITDA grew by 18.6% at constant exchange rates (10.0% as reported) from EUR 11.0 million in the third quarter of 2010 to EUR 12.1 million in the corresponding period of this year.

Again excellent growth rates in Asia Pacific

Brenntag Asia Pacific continued on its growth path and reported once again double-digit growth rates in the third quarter of 2011. Operating gross profit reached EUR 20.4 million in the third quarter of financial year 2011, rising by 29.9% based on constant exchange rates (25.9% as reported) compared to EUR 16.2 million in the prior-year quarter. The growth in operating gross profit was supported by the acquisition of Zhong Yung (International) Chemical Ltd., a China-based chemical distributor. Through this acquisition, which was closed in September, Brenntag achieved the strategic market entry in China, the world’s fastest-growing chemical market. Operating EBITDA increased by 50.8% based on constant exchange rates (as reported growth: 48.3%) from EUR 6.0 million in the third quarter of 2010 to EUR 8.9 million in the third quarter of this year.

Strong free cash flow supported by reduction in working capital

The free cash flow reached EUR 336.8 million in the first nine months of 2011 in comparison to EUR 223.1 million in the corresponding period of last year. The positive development of free cash flow was supported on the one hand, by the clear growth of EBITDA by 11.0% and, on the other hand, by a reduction of working capital to EUR 957.3 million in the third quarter. Capex remained roughly at the prior-year level which means that Brenntag continues to maintain and expand its facilities. The strong free cash flow generation underscores the Group’s ability to make value accretive acquisitions and proves the high level of resilience in more challenging economic environments inherent in Brenntag’s business model.

Prospects: Full-year expectations confirmed

In the light of the positive business development and the strong results in the first nine months of this year, Brenntag confirms its forecast for its full-year operating EBITDA. Under the assumption that the global economy does not slide into a recession and there will be no major changes in the average US-Dollar exchange rate for the remaining year compared to the first nine months of 2011, Brenntag is confident to achieve a range of EUR 650 to 670 million operating EBITDA in financial year 2011.