How distributors are doing so far

A LOOK AT THE BOOKS

FINANCIALS • CHEMICAL DISTRIBUTORS AROUND THE WORLD FACE A RANGE OF HEADWINDS BUT RECENT RESULTS FROM LEADING PLAYERS ARE MOSTLY TINGED WITH OPTIMISM

UNIVAR HAS ANNOUNCED a third-quarter net income of $38.9m, compared to a net loss of $63m 12 months ago, from relatively stable net sales of around $2bn. “Our execution is improving and we are building momentum to become the kind of company that consistently delivers double-digit earnings growth despite unforeseen events,” says chairman and CEO Steve Newlin. “The work our people did in preparation for and in the aftermath of the hurricanes and earthquakes that tragically struck last quarter is truly commendable. Our teams worked with our supplier partners to mitigate shortages that kept our customers up and running, highlighting the true value a leading global distributor with scale advantages like Univar brings.”

Breaking these figures down geographically, Univar reports that in its home country of the US it achieved net sales for the quarter of $1.2bn, with gross profit increasing 1.5 per cent year-on-year to $273.4m. At the same time, adjusted EBITDA came in “about even with last year” at $90.7m, having been “negatively impacted, net of benefits, by roughly $6m as a result of Hurricanes Harvey and Irma”. The majority of this impact, it says, “was from the temporary closure of Univar sites, the impact of lost business to customers who were unable to operate and supply disruptions from Gulf Coast producers”.

HEALTHY INCREASES Over in Canada, net sales increased by a healthy 15 per cent over the period to reach $299.9m, “driven by higher average selling prices along with an increase in volumes, which benefited from a recovery in the Canadian energy and mining sectors”. The business also saw its gross profit rise 1.1 per cent to $56.2m, although adjusted EBITDA dropped 1.5 per cent to $25.6m. Across the Atlantic in Europe, the Middle East and Africa (EMEA), things proved even rosier: net sales increased 10.8 per cent to $456.9m; gross profit 10.9 per cent to $102.9m; and adjusted EBITDA 16.5 per cent to $33.2m.

As for the company’s Rest of World segment, net sales increased 2.5 per cent year-on-year to $106.9m, with Univar’s Latin American operations impacted by both Hurricane Harvey and recent earthquakes in Mexico, “which led to shortages of products from suppliers and chemical price increases”. That said, “improved sales force execution and cost reductions in Latin America and increased profitability in Asia Pacific”, helped the segment to close the quarter with a gross profit of $22.2m and an adjusted EBITDA $9.3m, representing respective increases on the prior year quarter of 9.3 per cent and 34.8 per cent.

ALL THE EIGHTS Another distributor with a broad global footprint is Netherlands-headquartered IMCD, which has announced a nine-months net result before amortisation and non-recurring items of €85.5m ($100.9m), up 8 per cent on the €79.2m achieved this time last year, from revenues worth €1.4bn, themselves also up 8 per cent year-on-year. “Our nine months’ results are in line with what we reported earlier this year: strong growth of EBITA »

DISTRIBUTOR PROFITABILITY IS INCREASINGLY

LINKED TO THE ABILITY TO PROVIDE VALUE-ADDING

and cash flow,” says CEO Piet van der Slikke. “The acquisition of LV Lomas closed in September and in close cooperation with the current management of Lomas, we are making good progress to integrate the business into IMCD with the goal of building a strong North American organisation.”

Following suit, the company’ EMEA operations also saw their revenues rise 8 per cent over the period, up from €805.5m to €871.9m. Better still, gross profit increased 10 per cent to €209m, while operating EBITA jumped 13 per cent, from €77.6m to €87.9m. These figures, IMCD notes, include the results of Milan-based Neuvendis, which it acquired in June. “Neuvendis focuses on the sales and distribution of speciality chemicals in Italy, in particular for the construction and coatings markets. In 2016, Neuvendis generated revenues of €26.3m with 20 employees,” it says.

ASIA AND THE AMERICAS Further east in Asia Pacific, revenues of €236.7m “remained at the same level as in the first nine months of 2016”. Nonetheless, gross profit increased 10 per cent year-on-year to €48.9m, while operating EBITA rose by 1 per cent, from €20.8m to €21m. In the Americas, on the other hand, revenue growth hit 15 per cent over the period, reaching €302.7m concurrent with a 15 per cent increase in gross profit, which totalled €60.1m compared to €52.1m 12 months previously. Operating EBITA, meanwhile, rose by 4 per cent over the period to €26m. These results, IMCD reveals, were aided by the acquisition of Texas-based Bossco Industries in July and the aforementioned purchase of Canada’s LV Lomas.

Noting that Bossco, which generated revenues of $11m in 2016, has now been fully integrated into IMCD’s existing operations in the US, the company states that the acquisition of Lomas “will provide IMCD a presence in Canada in all relevant core markets and will further strengthen IMCD’s organisation in the US”. With around 280 employees, Lomas, it says, generated revenues of C$383m in 2016, with the acquisition “financed by available cash and existing bank facilities”.

NEWS FROM THE FUTURE For some companies, though, it’s 2018 already, with US-headquartered Aceto, for instance, announcing a first-quarter net income of $0.5m. This, it says, marks a drop of 89.6 per cent from the $4.4m achieved 12 months ago and came about despite a 44.7 per cent increase in sales over the period, which went from $128m to $185.3m. “While our first-quarter results were largely in line with our expectations and we still plan to launch 15 to 20 products in fiscal 2018, the timing of some of our product launches will be delayed due to API constraints and technical challenges, issues which we expect to fully resolve as the year progresses,” CEO William C Kennally III says.

Meanwhile, US-based Hawkins has posted second-quarter sales of $125.4m, an increase of 3.4 per cent on the $121.3m achieved a year ago. Nevertheless, the company saw its net income over the period drop from $7.2m to $5.2m. “Our second quarter and year-to-date results were negatively impacted by two key factors. The first key factor was investments made to facilitate future growth in all parts of our company and to comply with increased customer and regulatory requirements,” says CEO and president Patrick Hawkins. “The investments in people and equipment were necessary for us to continue to offer best-inclass service and manufacturing operations. We believe most of these investments are behind us and we remain focused on controlling our costs.”

“The second key factor impacting our results was rapidly rising material costs and competitive pressures that limited our ability to pass all of these cost increases along to our customers,” he continues. “We have seen strong sales of certain higher margin specialty products that has offset some of the impact of competitive pricing pressures and continue to work to expand our offerings to bring new applications and opportunities to market.” HCB www.univar.com www.imcdgroup.com www.aceto.com www.hawkinsinc.com

HAWKINS HAS FACED INCREASING REGULATORY

DEMANDS AND HIGHER MATERIAL COSTS, WHICH