- Solid financial results and very high free cash flow: Operating gross profit* reached 1,001 million EUR in Q3 2023 which is 4%** below the very high prior-year quarter. Operating EBITA*** reached 303 million EUR (-15%). Overall, the results are broadly in line with expectations of gradual normalization in a continuously challenging market environment. The very strong free cash flow of 442 million EUR exceeded the previous year’s figure (+27%), continuing to show the resilience of the business model.
- Divisional performance with a mixed picture across divisions and regions: In adverse and uncertain market conditions, both Brenntag divisions observed a sequential improvement in demand in course of Q3 and overall performed in line with expectations below the strong prior-year quarter results. Brenntag Specialties’ operating EBITA stood at 135 million EUR (-20%), again affected by negative volume developments year-over-year. Brenntag Essentials delivered overall good results despite a volume decrease with an operating EBITA of 199 million EUR (-13%).
- Successful execution of M&A strategy: Brenntag is driving its “Strategy to Win” with targeted acquisitions and is confident to reach the planned annual M&A corridor of around 400 to 500 million EUR in 2023.
- Cautiously optimistic on the volume development: Brenntag expects its operating EBITA for the financial year 2023 to be around the lower end of the guidance specified in August 2023.
Brenntag (ISIN DE000A1DAHH0), the global market leader in chemicals and ingredients distribution, presented solid financial results for the third quarter 2023 broadly in line with expectations. In a challenging macroeconomic environment characterized by geopolitical uncertainties and inflationary trends, Brenntag Essentials continued to showcase its resilience and delivered overall good results despite a volume decrease, with an especially robust performance in North America. The business of Brenntag Specialties was again affected by negative volume developments and price pressure. Both divisions observed a sequential improvement in demand in course of Q3 that is expected to continue in Q4.
Christian Kohlpaintner, Chief Executive Officer of Brenntag SE: “The macroeconomic environment continued to be challenging in the third quarter with ongoing geopolitical uncertainties and inflationary trends that impacted our performance. We saw a mixed picture across divisions and regions but also observed market conditions continue to normalize with sequential volumes moderately increasing as it has been anticipated for the second half of 2023. This modest volume recovery and our overall solid Q3 performance provides a rather stable basis for the remainder of the year despite slightly softening pricing levels. We expect our operating EBITA for the financial year 2023 to now be around the lower end of our guidance specified in August 2023. We thank our employees who made these results happen against numerous headwinds.”
Financial performance
In the third quarter 2023, Brenntag generated sales of 4,088.3 million EUR which is 15.4% below previous year quarter. Operating gross profit reached 1,000.6 million EUR, 4.3% below the strong prior year quarter. Operating EBITA came in at 302.7 million EUR, a decline of 15.3% compared to the very strong Q3 2022 performance. The free cash flow was again very strong and with 441.6 million EUR exceeded the previous year’s figure (347.6 million EUR) significantly by 27.0% as Brenntag continued to show its resilience with very strong cash flow generation. Earnings per share stood at 1.18 EUR (Q3 2022: 1.60 EUR).
Global divisions perform in line with expectations
Market conditions remained challenging but continued to normalize with volumes increasing sequentially as it has been anticipated for the second half of the year. In this still challenging environment, the performance of Brenntag’s global divisions was broadly in line with expectations.
The business of Brenntag Specialties, the global go-to service partner for innovative and sustainable solutions for specialty chemicals and ingredients, was again affected by negative volume developments year-over-year in combination with falling sales prices. The division reported an operating gross profit of 371.0 million EUR (-5.5%). Operating EBITA reached 135.0 million EUR, a decrease of 19.6% compared to Q3 2022. In Q3 2023, a positive development in volumes was reported in the EMEA region, whereas in North America the volumes were again low.
Brenntag Essentials, the market leader in industrial chemicals distribution across a wide range of industries, continued to demonstrate its resilience in adverse market conditions and delivered good results in Q3 2023 despite volumes below previous year level. The operating gross profit came in at 622.9 million EUR, which is 3.5% below prior-year quarter. Operating EBITA reached 198.8 million EUR, this is -13.4% compared to very good results of the previous year’s quarter. North America showed a robust performance, while price normalization compared to very high price levels last year affected the EMEA region. In APAC, an increase in volumes compared to last year was achieved both organically and including acquisitions.
Successful execution of value enhancing M&A activities
Kristin Neumann, Chief Financial Officer of Brenntag SE: “Brenntag’s strong financial profile gives us ample room to grow organically and to successfully execute value accretive M&A along our ambitious growth strategy. We have signed or closed seven acquisitions so far this year, with a total enterprise value of more than 370 million EUR. We are well on track of reaching our planned corridor of around 400 to 500 million EUR per year.”
The majority of acquisitions in 2023 are associated to the company’s Specialties business and in particular focusing on attractive end markets like Nutrition, Personal Care and Pharma, in line with Brenntag’s strategic ambition to grow in these areas. This includes the most recent acquisition agreement with Colony Gums, a US-based manufacturer of stabilizer blends and service provider that will expand Brenntag’s services and product portfolio in Nutrition and strengthen its Life Science portfolio in North America. In early November, Brenntag Essentials announced the acquisition of OWI Chlor Alkali in North America, one of the largest distributors of caustic soda. The acquisition significantly expands the division’s local and regional footprint.
Share buyback program completes first tranche
Brenntag completed the first tranche of its share buyback program initiated in the beginning of 2023. Brenntag has acquired shares with a value of 500 million EUR of the programs total volume of 750 million EUR. The planned execution of the second tranche in the amount of up to 250 million EUR will start early 2024. With completion of the first tranche Brenntag also decided on the cancellation of the acquired shares.
Guidance FY 2023 further specified to be around the lower end of current range
The company expects a continuously tough operating environment, characterized by geopolitical uncertainties and tensions as well as macroeconomic challenges, but also a continued slight sequential recovery in volumes. The solid performance in a challenging market environment and the continued sequential volume recovery observed in Q3 provide a rather stable basis for the remainder of the year despite slightly softened pricing levels.
In August 2023, the company specified its guidance for the operating EBITA for the FY 2023 to be between 1.3 billion EUR to 1.4 billion EUR. Brenntag now expects the operating EBITA to be around the lower end of the guidance range.
Brenntag is hosting its Capital Market Day on December 5, 2023, in London, where the company will provide an update on the execution of its “Strategy to Win”, present the conclusions on strategic options and the future path for Brenntag and its divisions.
Financial Results at a glance – Q3 2023
