Letter of the CEO on Q3 results

Dear Shareholders,   The third quarter for many of our investors has been dominated by events outside of Brenntag with significant volatility in stock markets around the world, continuing issues around sovereign debt in the Euro zone and fluctuation in the value of the US dollar.

 

Within Brenntag we have continued to execute our strategy of positioning the company in higher-growth markets and industries whilst at the same time building in resilience, which allows the Group to balance its performance as a whole. In the third quarter, we were able to grow our gross profit by 7.7% to EUR 445.5 million on a constant currency basis and grow our operating EBITDA by 8.6% on the same basis to EUR 166.6 million. Our operating EBITDA / gross profit ratio therefore stood at 37.4% for the quarter. Earnings per share grew from EUR 0.79 in previous year’s quarter by 64.6% to EUR 1.30 in the third quarter of 2011.

 

Furthermore, we were able to generate a free cash flow of EUR 221.6 million during the period, underscoring the Group’s ability to make value accretive acquisitions. This free cash flow generation additionally proves the high level of resilience in more challenging economic environments inherent in Brenntag’s business model.

 

All regions except Europe, which was flat to slightly weaker compared to the same quarter last year, contributed to the growth of 8.6% in operating EBITDA on a constant currency basis. We expect Europe to return to growth in the last quarter of the financial year.

 

Despite the relative turbulence of the financial markets, we continue to deliver our promised acquisition strategy with the successful closing of Zhong Yung (International) Chemical Ltd., the long-expected and well-prepared market entry into China which positions Brenntag in three key business regions of China. Integration has already started and we are excited by the prospects the acquisition offers in terms of future growth.

 

During September we also signed an even larger acquisition following the successful completion of the negotiations to acquire Multisol Group, which provides a further expansion of our product portfolio in specialty additives and high-quality base oils for the lubricants sector. We will also significantly expand our capability and service in value added blends in an increasingly sophisticated market. We expect to close the transaction later this year.

 

In July, we refinanced a substantial part of the Group’s debt and replaced it by a new financing structure. The transaction attracted a very strong level of interest that resulted in a significant over-subscription of the syndicated loan facilities. In connection with that process we also issued Brenntag’s first bond. The new financing structure provides for a high level of diversification of our financing mix. In addition, we benefit from lower interest charges as well as more financial flexibility in many areas of our business and extended maturities. The full effect on our financial result will become visible next year.

 

Finally I come to the forecast for the full year 2011. It would be fair to say that the economic situation and outlook remain challenging. We recognize these challenges and feel we have the optimal level of diversity, operational levers and flexibility to face such challenging conditions. Taking out the cost of the recent successful refinancing and assuming no major change in the average US dollar exchange rate in the rest of the year, we continue to expect the group to meet the previously issued guidance of EUR 650 to 670 million operating EBITDA for 2011.

 

To all our stakeholders around the world, I would like to express on behalf of all my co-workers our thanks for your continued support and interest in our company.

 

 

Mülheim an der Ruhr, November 8, 2011

 

 

Steven Holland

Chief Executive Officer