Univar progresses transformation

WITH THE PROGRAMME

RESULTS • NOT SURPRISINGLY, UNIVAR HAS POSTED WEAKER RESULTS FOR 2020, BUT IT IS PROGRESSING WITH ITS STRATEGIC PLAN TO IMPROVE PRODUCTIVITY AND REDUCE COSTS

UNIVAR SOLUTIONS HAS recorded net income of $52.9m for the calendar year 2020, compared to a loss of $100.2m in 2019. Adjusted net income, which gives a better comparison, shows a fall of 8.5 per cent to $211.9m for 2020, while adjusted EBITDA was 9.7 per cent lower at $635.8m.

“I am pleased with the progress the team has made against our strategic objectives, meeting the challenges of remote working, variable supply and demand, as well as macroeconomic uncertainties,” says president/ CEO David Jukes. “Our financial results reflect the hard work of our dedicated team members, the strength of our supplier and customer relationships, and the benefit of our investment in keeping digital at our core. I am pleased we have made good progress against our Streamline 2022 (S22) goals by executing on non-core divestitures, expanding our supplier network, and moving closer to completing our business systems migration and Nexeo integration.”

For the fourth quarter, external sales were 5.5 per cent below the year earlier figure at $2.04bn, while gross profit was down 7.2 per cent at $484.5m and adjusted EBITDA fell 7.8 per cent at $146.4m. That decline was most apparent in Univar’s largest market in the US, though sales were also off in the Latin America segment. Part of that reflects the former divestiture of the Environmental Sciences business, along with price deflation affecting certain products and ongoing demand weakness in the global industrial end markets. AROUND THE WORLD Adjusted EBITDA in the USA division fell 11 per cent in the fourth quarter, along with the decline in sales, although this was partially offset by synergies arising from the Nexeo Solutions acquisition, cost reduction efforts and higher demand in certain end markets. The Canada division was also affected by the Environmental Sciences divestiture, as well as overall lower energy demand and price deflation, although it enjoyed higher sales from the wholesale agriculture and industrial chemicals sectors.

The Europe, Middle East and Africa (EMEA) division increased external sales by 2.1 per cent in the fourth quarter, though it was 3.0 per cent down on a constant currency basis; adjusted EBITDA fell 5.5 per cent to $29.4m, largely due to falling sales of pharmaceutical finished goods, as had been expected, together with lower industrial end market demand, though Univar reports some benefit arising from the Brexit process.

STRATEGY FOR RECOVERY In response to the ongoing uncertain economic environment, Univar says it continues to actively manage its expense base and realise cost reductions in an effort to maintain its financial strength while continuing to serve its suppliers and

UNIVAR SOLUTIONS HELD ITS OWN DURING 2020

AS IT CONTINUES TO PREPARE ITSELF FOR A MORE

customers’ needs. During 2020, these savings represented in aggregate in excess of $20m in cost reductions on a year-overyear basis, which are incremental to the net synergies realised from the Nexeo acquisition of $46m. Univar says it continues to expect to achieve the targeted $120m in annual Nexeo net synergies by early 2022.

Univar also reports that it made significant progress during the fourth quarter in rolling out its S22 programme, which is designed to improve operational agility, drive faster sales growth, particularly in North America, maximise net free cash flow conversion, reduce leverage and improve EBITDA margins by 9 per cent by the end of 2022.

Those moves have included the appointment of a new president for the North American chemical distribution business in the shape of James B Holcomb, an exit from the Canadian wholesale agricultural distribution business and the sale of its Canadian agriculture services business. Univar has also reached agreement to sell its Distrupol business, while also acquiring a business from Zhuhai Tech Chem Silicone Industry Corp.

WHERE TO NEXT “Looking to 2021, although the exact timing of the economic recovery is uncertain, our expected full-year adjusted EBITDA guidance range of $630m to $650m reflects underlying performance in our ongoing businesses above expected general industrial growth levels in each of our regions to offset the expected softer essential end markets performance,” Jukes says. “Univar Solutions is very well positioned in our markets to serve our supplier and customer needs and we expect to execute on new opportunities and grow shareholder value.”

In the nearer term, Univar is projecting adjusted EBITDA between $150m and $160m in the first quarter, below the $161.6m recorded for the first quarter of 2020. “Our forecast versus prior year reflects the effects of divestitures and a more normalised level of essential end market product margins,” the company says.

One promising aspect of Univar’s balance sheet is its level of liquidity, which at the end of 2020 stood at $855.0m, including $386.6m cash-on-hand and available lines of credit; with the ongoing cost reduction programme, it expects this figure to be in the range of $800m to $900m by the end of 2021, with leverage below 3x. Univar also notes it has no significant debt maturities until 2024. www.univarsolutions.com