Brenntag’s strategy pays off

GOING TO PLAN

RESULTS • STRATEGIC REORGANISATION AND A CONTINUING FOCUS ON ACQUISITIONS HAVE PROPELLED BRENNTAG TO ITS HIGHEST EVER SALES LAST YEAR, WITH MORE TO COME IN 2022

BRENNTAG HAS REPORTED 2021 sales of €14.4bn, with operating gross profit up almost 20 per cent at €3.38bn; operating EBITDA was almost 30 per cent higher at €1.35bn, while profit after tax was stable at €461m, reflecting extraordinary expenses relating mainly to excise tax payments and provisions.

The implementation of Project Brenntag, the company’s comprehensive transformation journey, started at the beginning of 2021. Brenntag says the transformation is ahead of plan and continues to make very good progress in achieving additional operating EBITDA of €220m annually by the end of 2023. It has so far completed 72 of the 100 planned site closures and reduced its headcount by 925 jobs.

One element of Project Brenntag was the restructuring of the company into two distinct divisions: Brenntag Essentials and Brenntag Specialties. Both contributed strongly to the 2021 results, with operating EBITDA growth of 34.3 per cent for Brenntag Specialties and 28.6 per cent for Brenntag Essentials.

Brenntag Essentials, which markets a broad portfolio of process chemicals across a wide range of industries, achieved an operating gross profit of €2.07bn, up by 16 per cent, almost entirely driven by organic growth. “In a challenging environment, Brenntag managed to maintain deliveries to customers throughout the year,” the company says. Brenntag Specialties, the largest specialty chemicals distributor in the world, grew operating gross profit by 25.4 per cent to €1.28bn, with a particularly strong growth contribution from the Americas and EMEA. There was a mixture of organic growth and contributions from recent acquisitions.

WORD FROM THE BOSS “Brenntag’s business model again proved its resilience in particularly difficult times of severe pressure on global supply chains,” says Dr Christian Kohlpaintner, CEO. “We expect the overall macro-economic, geopolitical, and the associated operational conditions to remain challenging. Supply chains have been and still are under severe pressure, further impacting production and supply. We only expect some normalisation of market conditions later in the year.”

In light of current economic conditions, Brenntag Group expects operating EBITDA for 2022 to be between €1.45bn and €1.55bn. This forecast is based on a normalising market environment later in the year, includes the potential efficiency improvement driven by the measures of Project Brenntag as well as the contributions to earnings from acquisitions already closed and assumes that exchange rates will remain stable. The global economy is expected to continue to be severely impacted by exceptional influencing factors that cannot be reliably forecast, such as the Covid-19 pandemic, current geopolitical developments, pressure on global supply chains, inflationary tendencies and price volatility.

BUY TO BUILD Brenntag invested some €440m in merger and acquisition activity during 2021, acquiring six companies; this was its highest investment since 2015. Some 80 per cent of the M&A spend was related to what Brenntag describes

as the “highly attractive” life sciences segment, especially in the nutrition industry. Among the major acquisitions were Zhongbai Xingye in China and JM Swank in North America. Those two deals propelled Brenntag’s global nutrition business to some €2.0bn in sales. Overall, acquisitions contributed €33m to operating EBITDA in 2021, of which the majority was attributable to deals that closed in the course of the year.

That acquisition activity has continued in the first quarter of 2022. Brenntag has entered the Israel market through the acquisition of specialty chemicals distributor YS Ashkenazi Agencies and its subsidiary Biochem Trading.

“The acquisition of YS Ashkenazi Agencies is an excellent opportunity for us to gain a foothold in the highly developed and innovative market in Israel,” says Henri Nejade, COO of Brenntag Specialties. “With this local presence, which is vital for our business, we can further expand our specialty products and services to suppliers and customers in the fast-growing Food & Nutrition and Personal Care markets in the region. We also see opportunities to expand our value proposition with global key accounts that operate in these markets.”

“The acquisition of YS Ashkenazi Agencies is perfectly in line with our M&A strategy in the region,” adds Anthony Gerace, senior vice-president, M&A at Brenntag Group. “YS Ashkenazi Agencies is the market leader in Israel in the important markets of Personal Care and Food & Nutrition. Its comprehensive product portfolio, large customer base and reputation for quality provide an excellent opportunity for us to leverage this new platform in the region.”

DONE DEALS Brenntag has also lined up a number of new and expanded distribution deals over the past two months. It signed an exclusive agreement with Corbion Animal Health for the distribution of its Alaopur line in Belgium, the Netherlands and France. Brenntag and Corbion were already working together in the food, pharma and cosmetics segments, but the new deal is seen as an important next step.

“This new partnership will enable Corbion to extend its presence to nearly full market coverage as well as seeing a number of new customers being serviced efficiently by the dedicated Brenntag team. Joining forces this way promises to become a successful path for the benefit of both partners as well as their customers,” says Nico Kors, global sales director at Corbion Animal Health.

Brenntag has also extended its deal with BASF to distribute its Baxxodur® portfolio of amine-based curing agents to cover the whole of North America. “We are proud to expand our relationship with BASF. This collaboration provides our customers the convenience of developing and sourcing their entire formula from one source,” says Ted Davlantes, president of Material Science, Brenntag Americas. “In addition, customers are fully supported with a dedicated team of industry experts and a broadened product portfolio.”

Brenntag Specialties has expanded its distribution agreement with Arkema for its waterborne acrylic resins to cover Mexico as well as the US and Canada. These resins are used in applications such as adhesives, caulks and sealants, construction products, architectural paints, traffic coatings and industrial coatings. “Arkema is committed to implementing the best possible distribution options for our customers in all markets and regions,” says Eric Dumain, global marketing director, coating resins at Arkema. “Based on our history working with Brenntag in other regions, we are confident they will help us accomplish this and anticipate a smooth transition for our customers.”

In addition, Brenntag has expanded its distribution agreement with Elementis Specialties to distribute its specialty chemicals and additives for the coatings, adhesives and sealant industries in India, Nepal, Sri Lanka and the Philippines. “We are excited to strengthen our strategic partnership with Elementis in these four countries as its products fit well into our existing product portfolios and will enable us to develop more value-adding solutions in coatings systems for our customers in each local market,” says Sanjay Karkhanis, president, materials science at Brenntag Asia Pacific. “This continues to build our longstanding partnership with Elementis, with whom we have been working with for more than 15 years in Asia Pacific.” www.brenntag.com

DR CHRISTIAN KOHLPAINTNER, BRENNTAG CEO, SAYS

THE FIRM’S BUSINESS MODEL HAS AGAIN PROVED ITS

RESILIENCE IN WHAT HAVE BEEN PARTICULARLY

DIFFICULT OPERATING CONDITIONS