Univar streamlines for success

REACH FOR THE FUTURE

STRATEGY • THE WORLD IS CHANGING FAST AND DISTRIBUTORS HAVE TO ADAPT TO MEET NEW DEMANDS. UNIVAR IS AIMING TO STREAMLINE ITS OPERATIONS TO MATCH

UNIVAR SOLUTIONS HAS embarked on a far-reaching programme – dubbed ‘Streamline 2022’ or ‘S22’ for short – to accelerate growth and increase earnings. The programme, announced in early August, envisages a renewed focus on operational efficiency and cost reduction and, in particular, the integration of the company’s digital capabilities.

S22 is expected to improve operational agility, drive faster sales growth, reduce leverage and, by the end of 2022, improve EBITDA margins to 9 per cent. The programme may well result in the sale of certain non-core assets and is expected to have a particular impact on operations in North America.

As part of S22, there will be a range of senior organisational alignments, with North American segments now reporting directly to group president/CEO David Jukes. As part of this, Mark Fisher has stepped down from his position as president of USA and Canada to pursue other opportunities.

Explaining the move, David Jukes says: “While we are currently reporting solid second quarter results, and progressing as expected on our Nexeo integration plans, we are seeing changes in market conditions and customer preferences. We believe that our S22 programme, as part of our strategy to Streamline, Innovate and Grow, will help to ensure we have the agility to enhance our competitiveness, advance our digital capabilities to better serve customers and increase our operational and financial flexibility as we work to position the company to capture greater value from the market recovery and growth opportunities ahead.”

FACES THAT FIT As part of the changes in North America, two new appointments have been made. Jennifer McIntyre has assumed the role of senior vice-president and chief streamline officer, as well as head of North American operations. She will be responsible for driving the completion of the Nexeo integration as well as the S22 cost and productivity efforts.

Brian Herington has been appointed senior vice president, CCO and head of North American Chemical Distribution. In this role

he will continue to drive the step change improvements in Univar Solutions’ commercial practices globally and lead its chemical distribution business in the US and Canada. Herington will build on the work already done to deliver market share growth through an omni-channel, customer-centric approach supported by digitised systems and automated processes.

Elsewhere, Nick Powell has been appointed senior vice-president, president of EMEA/ APAC and global head of Consumer and Industrial Solutions. In this role he will focus on consistency of performance for customers and suppliers in all geographies, working to provide new opportunities for growth. “The expansion of this largely differentiated set of chemistries and ingredients is an important driver of the company’s mix enrichment goals,” Univar says.

The Latin America division will continue to be led by Jorge Buckup.

Univar expects that the S22 programme will result in $50m in additional costs in 2020, of which some $20m will be cash; divestment of non-core assets should deliver cash proceeds of at least $200m.

LATEST RESULTS Univar Solutions has meanwhile reported second-quarter financial results that it describes as “solid”, despite the inevitable impact of the Covid-19 pandemic. External sales were 22.3 per cent lower than the same period last year at $2.01bn, with consolidated adjusted EBITDA down 18.8 per cent at $163.2m and consolidated net income slumping from $16.3m to $1.8m.

Nonetheless, Jukes remains upbeat, saying: “I’m pleased with our operating and financial performance during the quarter in these challenging times, as we lived our values and continue to make the safety of our employees, suppliers and customers our priority. The strength of our supplier and customer relationships, operating infrastructure, investments in our sales force and digital capabilities, along with our agility, has enabled us to execute well in difficult markets.”

But the difficulties being experienced in markets around the world, and the need to try to predict the shape of business in the future, underpins the S22 programme. Jukes explains: “Looking ahead, accelerating our strategy through the Streamline 2022 programme will ensure we continue to enhance our competitiveness, advance our digital capabilities to better serve customers, increase our operational and financial flexibility, and capture greater value from the market recovery and growth opportunities for both the near- and long-term.”

AROUND THE GLOBE Sales fell in all four geographical divisions but particularly in North America. The USA division recorded a 27.2 per cent decline to $1.17bn and Canada was off by 18.1 per cent at $331.5m. The decline in the small Latin America division was 15.4 per cent, while Europe, Middle East and Africa (EMEA) lost 10.5 per cent at $409.6m.

In the USA segment, sales fell as a result of lower industrial end market demand, energy headwinds and price deflation for certain products. The drop also reflected the earlier sale of the Environmental Sciences business. Gross profit was down by 19.1 per cent, though gross margin improved on the back of favourable changes in the product mix in essential end markets. There was also a smaller improvement in EBITDA margin, partly reflecting net synergies from the Nexeo acquisition.

Results in Canada were also influenced by the Environmental Sciences divestiture and the same fundamental business conditions as those experienced in the US.

Latin America experienced some demand improvements in essential end markets and the energy sector but its results were impacted by adverse exchange rate movements. There was, though, a 17 per cent increase in adjusted EBITDA to $11.0m.

In the EMEA region, the decline in industrial end market demand was partially offset by higher demand for certain products in essential end markets. Gross margin similarly improved as a result of the change in product mix, while adjusted EBITDA increased by 3.0 per cent to $39.7m.

As it had advised earlier, Univar has withdrawn its full-year financial guidance as a result of the “evolving and dynamic” implications of the Covid-19 pandemic on the macro-environment and the company’s business. In response to this “challenging and uncertain” economic environment, Univar says it is “continuing to actively manage its expense base and seeking to realise cost reductions” in an effort to maintain its financial strength while continuing to serve the needs of its suppliers and customers. Those cost savings are expected to aggregate more than $40m this year, in addition to the net synergies of $35m anticipated from the Nexeo acquisition. www.univarsolutions.com

DAVID JUKES, UNIVAR CEO (BELOW), SAYS THE

‘STREAMLINE 2022’ PROJECT WILL ENSURE THE COMPANY

ENHANCES ITS COMPETITIVENESS, THROUGH FINANCIAL

FLEXIBILITY AND LEVERAGING ITS DIGITAL CAPABILITIES