Univar strategy pays off

DEFENCE OF THE REALM

RESULTS • THE REASONING BEHIND UNIVAR’S ACQUISITION OF NEXEO SOLUTIONS BECOMES CLEARER IN LIGHT OF THE GROUP’S 2019 FINANCIAL REPORT

Univar Solutions has reported 2019 net sales of $9.29bn, up from $8.63bn in 2018, although operating income fell from $387.4m to $187.3m. The company posted a net loss from continuing operations of $105.6m, as against a net income in 2018 of $172.3m.

Comparison of the 2018 and 2019 financial results is complicated due to the acquisition by Univar of Nexeo Solutions, which was completed on 1 March 2019, and the subsequent sale of Nexeo’s plastics distribution business. Nonetheless, Univar is clear that the change has been good for shareholders, with president/CEO David Jukes saying: “I am very pleased at how we have executed successfully against our strategic priorities of integration and synergy capture from the Nexeo acquisition, portfolio management and strengthening our balance sheet.

“During the [fourth] quarter and the full year 2019, we earned solid margins and had strong cash flow generation, despite weakness in some of our end markets and lower chemical prices.” Jukes adds. “Our Nexeo integration team successfully achieved important ERP migration milestones and realigned sales territories to increase our market coverage and increase our salesforce effectiveness. We also completed non-core divestitures, delivering on our commitments to focus on our chemical and ingredient businesses and reduce leverage to our lowest level as a public company. We are continuing to position Univar Solutions to deliver long-term profitable growth and shareholder value.”

AROUND THE WORLD Fourth quarter net sales were up 9.8 per cent year-on-year at $2.2bn, driven by the contribution from the Nexeo acquisition and strong operating performance. Sales growth was partially offset by chemical price deflation in the US, Canada and EMEA, lower demand for chemicals and ingredients from global industrial end markets, and overall weakness in the energy markets. “Similar to the third quarter of 2019, the macroeconomic environment in the US segment weakened sequentially during the quarter,” Univar notes.

Fourth quarter gross profit surged by 18.4 per cent to $522.2m, again boosted by the Nexeo acquisition, as well as “improving sales force execution and favourable product and end market mix”.

For the year as a whole, US external sales grew by 16.6 per cent as a result of the Nexeo acquisition, partially offset by chemical price deflation and lower demand for chemicals. Adjusted EBITDA was up by 15.6 per cent at $102.4m, with improved margins as a result of stronger margin management and a more favourable product and end market mix.

The Latin America division also performed well, with external sales up 39 per cent at $126.0m (excluding currency effects), again showing the impact of the Nexeo acquisition together with growth in sales in Mexico’s energy sector and VAT adjustments in Brazil. There was a strong improvement in gross profits and adjusted EBITDA was up by 63 per cent on a constant currency basis.

Developments in 2019 were not so impressive in other territories; in Canada, for instance, external sales fell by 3.1 per cent, primarily due to the slowdown in the Canadian energy markets and chemical price defl ation. Profi tability improved, though, with adjusted EBITDA up by 4.7 per cent and margins also up. Solid performance in the industrial chemical business and certain commodity products, along with the Nexeo acquisition, were partially offset by lower volumes in the energy sector, Univar reports.

The Europe, Middle East and Africa (EMEA) division fared less well, with external sales down by 7.5 per cent as a result of chemical price defl ation, although margins did improve and adjusted EBITDA grew by 1 per cent to $33.1m on a reported currency basis. Improved performance in bulk and local distribution was partially offset by continued market pressure in the pharmaceutical fi nished goods line. CLOUDY AHEAD Looking ahead to 2020, Univar Solutions expects continued weak end markets and a challenging competitive environment in the fi rst half of the year, with the fi rst quarter likely to be the weakest quarter of the year. It predicts fl at industrial production growth, weighted towards the latter part of the year, with energy headwinds in the US, pricing pressures in bulk commodities, and the unknown impact of the Coronavirus outbreak.

Internally it is aiming for some improvements, such as enhanced sales force effi ciency driven by the realignment of territory responsibilities, new supplier authorisations, and forecast net cost synergies from the Nexeo acquisition of some $40m.

Putting all this together, Univar is predicting adjusted EBITDA for the full year 2020 of between $700m and $740m, compared to $704.2m in 2019. www.univarsolutions.com

UNIVAR CEO DAVID JUKES: PLEASED WITH THE

EXECUTION OF STRATEGIC PRIORITIES