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HELD TO ACCOUNT FINANCIALS • DISTRIBUTORS HAVE TO BE STRONG TO STAND UP TO THE MACROECONOMIC HEADWINDS AND, FOR BRENNTAG, THAT MEANS TOUGHING IT OUT IN THE MATURE MARKETS
“FOR BRENNTAG, FINANCIAL year 2019 was marked by a difficult macroeconomic environment, with economic downturns, a lack of impetus and weak demand. This was the case primarily in our two large regions, EMEA and North America,” says Georg Müller, CFO of Brenntag, in his remarks on the group’s financial results for full year 2019. “However, we once again demonstrated the stability of our business model and report operating EBITDA almost on a par with the prior-year figure on a like-for-like basis. The very positive free cash flow performance is encouraging. It shows
GEORG MÜLLER, BRENNTAG CFO, IS OPERATING UNDER CONSIDERABLE MACROECONOMIC UNERTAINTY
that we are able to deliver a strong liquidity performance in challenging times.” Sales were flat against 2018, coming in at €12.82bn, and, while operating EBITDA rose by 11.3 per cent to €1.00bn, that was all due to the initial application of the IFRS 16 lease accounting standard, absent which EBITDA would have been slightly down on the prior year. Business in the EMEA (Europe, Middle East & Africa) region was marked by weak demand and a lack of economic impetus throughout 2019. In this difficult environment, Brenntag EMEA generated operating gross profit on a par with the prior-year figure at €1.14bn. Operating EBITDA rose by 5.6 per cent to reach €406.3m, largely as a result of the application of IFRS 16.
Following a good start to the year, Brenntag North America faced falling momentum and an increasingly difficult market environment as 2019 went on. The North American companies generated operating gross profit of €1.22bn, an increase of 3.4 per cent, and operating EBITDA climbed by 10.1 per cent to €474.8m, again due mainly to IFRS 16. Overall in the Latin America region in 2019, Brenntag posted an improvement in earnings driven by organic growth and demonstrated its resilience in a continued volatile and difficult market environment. Operating gross profit rose by 6.5 per cent to €177.0m and operating EBITDA was up 38.0 per cent at €55.9m, only partly attributable to IFRS 16. The Brenntag companies in the Asia-Pacific region achieved further growth in the reporting period, due primarily to positive contributions from recent acquisitions. Operating gross profit rose 14.7 per cent to €266.8m and operating EBITDA was up 24.7 per cent at €101.1m, of which less than half reflects IFRS 16. LOOKING AHEAD Dr Christian Kohlpainter, who assumed the role of CEO in January, says: “Brenntag is a strong brand with a good reputation in its markets. Our company offers great potential for organic profitable growth. My Board of Management colleagues and I will therefore make every effort to unlock more of this potential. Going forward, we will not only maintain our highly marketcentric approach, but also focus to a greater extent on optimising our processes, procedures and structures, thereby creating the conditions crucial to long-term organic growth.” Brenntag is currently examining its internal structures, processes and organisation along the value chain. Brenntag says it sees potential for improvement in harmonisation and standardisation as well as in the stringent internal execution of initiatives and measures. Brenntag currently expects a positive performance at operating EBITDA level during 2020, assuming stability in exchange rates. However, it acknowledges it is operating in an environment of considerable macroeconomic uncertainty and its projection assumes that the effects of these risks and, in particular, the new Coronavirus crisis remain limited. www.brenntag.com
HCB MONTHLY | APRIL 2020
