Mar 7, 2017

For 2016, Brenntag reports operating earnings above prior year and strong performance in the EMEA and Asia Pacific regions

Gross profit* rises to 2,369.3 million EUR (+4.6% as reported)
Operating EBITDA** reaches 810.0 million EUR (up from 807.4 million EUR in the previous year)
Free cash flow at a high level again, amounting to 641.4 million EUR
Earnings per share at 2.33 EUR; dividend of 1.05 EUR per share to be proposed (+5.0% on the previous year)
For 2017, Brenntag expects growth in the key performance indicators gross profit and operating EBITDA

Brenntag (WKN A1DAHH), the global market leader in chemical distribution, lifted its key performance indicators gross profit* and operating EBITDA** in financial year 2016. This performance was achieved in an economic environment that varied considerably across the Group’s regions: whilst earnings in North and Latin America were negatively impacted by several economic and political factors, the existing business in the EMEA (Europe, Middle East & Africa) and Asia Pacific regions performed very well. The acquisitions made a positive contribution to earnings. Once again, the strengths of the business model were evident and the Group was able to translate operating earnings into high free cash flow in financial year 2016.

Brenntag generated sales of 10,498.4 million EUR in financial year 2016, an increase of 1.5% (+2.9% on a constant currency basis). The Group also delivered a strong growth in gross profit*, an especially important metric for Brenntag, of 4.6% year on year (+6.0% on a constant currency basis) to 2,369.3 million EUR. Operating EBITDA** was up on the prior-year figure to 810.0 million EUR (+0.3% as reported; +1.9% on a constant currency basis) and therefore in the middle of the range forecast for financial year 2016.

The Brenntag Group posted strong free cash flow again in 2016, amounting to 641.4 million EUR. The excellent prior-year figure (764.3 million EUR) had benefitted from exceptionally strong falls in market prices for chemicals in 2015 and, as expected, could not be repeated in the reporting period.

Increased dividend to be proposed
Profit after tax amounted to 361.0 million EUR in financial year 2016, a slight decrease on the prior-year figure of 368.1 million EUR. Earnings per share reached 2.33 EUR. On this basis, and given the strong cash flow, the Board of Management and Supervisory Board will propose an increased dividend of 1.05 EUR per share (+5.0% on the previous year) at the General Shareholders’ Meeting on June 8, 2017. The payout ratio is 45% of profit after tax attributable to Brenntag shareholders. Brenntag wishes to continue to pay an attractive dividend in the coming years and now targets a payout ratio of between 35% and 50%. Since the IPO in March 2010, the dividend has more than doubled.

Steven Holland, Chief Executive Officer of Brenntag AG, said, “The Brenntag Group showed a positive performance overall in 2016. We were very pleased with the results in our large EMEA region and in the Asia Pacific segment, where we achieved further growth from the existing business in particular. The investments we have made and the measures we have taken here are paying off. In North America, on the other hand, continued weak demand from customers in the oil & gas sector and weak economic momentum in the region had a noticeable impact on our business in the reporting period. Thanks to its international presence and broad diversification, however, Brenntag was able to increase operating EBITDA and continue to systematically implement its acquisition policy in 2016.”

EMEA delivers positive performance and growth
Brenntag’s EMEA (Europe, Middle East & Africa) region grew in financial year 2016. Operating gross profit* amounted to 1,064.4 million EUR, a year-on-year increase of 3.9% (+6.4% on a constant currency basis). Operating EBITDA** climbed by 2.6% to 362.3 million EUR (+5.6% on a constant currency basis). This positive performance is attributable to both the expansion of the existing business and the contributions from the acquisitions. Given the fact that economic growth was only moderate, this is a very encouraging result.

Earnings in North America severely impacted by weak environment
The business in North America was severely impacted by the pronounced weakness in the oil & gas sector and the generally subdued economic environment in the course of 2016. This was counteracted by the positive contributions to earnings from acquisitions. Brenntag’s North America region generated operating gross profit* of 997.5 million EUR, a year-on-year increase of 5.8% (+5.9% on a constant currency basis). Operating EBITDA** declined by 2.3% to 357.3 million EUR (-2.2% on a constant currency basis).

Economic and political turmoil weighs on earnings in Latin America
Brenntag’s Latin American companies generated operating gross profit* of 170.9 million EUR in financial year 2016, a decrease of 15.1% on the prior-year figure (-13.4% on a constant currency basis). Operating EBITDA** reached 45.9 million EUR, a decline of 29.1% (-27.6% on a constant currency basis). This decline in earnings is due primarily to the significant devaluation of the local currency in Venezuela, the Bolivar. In addition, the environment in several countries in the Latin America region was marked by a high level of uncertainty and volatility, especially in Brazil.

Asia Pacific delivers impressive double-digit rates of growth
In a positive environment of rapid growth, Brenntag Asia Pacific delivered an excellent performance in financial year 2016. The existing business was on an extremely positive track, achieving double-digit rates of growth. This very encouraging earnings performance was also supported by the contribution from the acquisitions. The region generated operating gross profit* of 182.3 million EUR, an increase of 30.2% compared with the previous year (+33.7% on a constant currency basis). Operating EBITDA** climbed by 32.6% to 66.7 million EUR (+35.8% on a constant currency basis).

Further growth forecast for 2017
Steven Holland, Chief Executive Officer of Brenntag AG, said, “We do have a positive view on the business development in EMEA and expect to see a progressive improvement in the North American environment. The oil & gas business is on a stable trend and should not present a headwind. For Asia Pacific we are optimistic and expect to see a continued positive development of our business. We are constantly working on improvements in all regions in order to drive organic business growth. This includes numerous global, regional and local initiatives. We maintain our strategic course in all our regions and thus believe that Brenntag is ideally positioned to continue its growth trajectory in 2017.”

Brenntag expects to see growth in its key performance indicators gross profit and operating EBITDA in financial year 2017.

Consolidated income statement		2016	2015	∆ as reported	∆ fx adjusted
Sales	EUR m	10,498.4	10,346.1	1.5%	2.9%
Gross profit*	EUR m	2,369.3	2,266.0	4.6%	6.0%
Operating EBITDA**	EUR m	810.0	807.4	0.3%	1.9%
Operating EBITDA** / Gross profit*	%	34.2	35.6
EBITDA	EUR m	810.0	807.4	0.3%	1.9%
Profit before tax	EUR m	535.7	549.3	-2.5%
Profit after tax	EUR m	361.0	368.1	-1.9%
Attributable to Brenntag shareholders		360.3	365.0	-
Earnings per share	EUR	2.33	2.36	-

Consolidated balance sheet		Dec 31, 2016	Dec 31, 2015
Total assets	EUR m	7,287.0	6,976.2
Equity	EUR m	2,959.2	2,690.5
Working capital	EUR m	1,354.6	1,268.1
Net financial liabilities	EUR m	1,681.9	1,676.1

Consolidated cash flow		Dec 31, 2016	Dec 31, 2015
Cash provided by operating activities	EUR m	539.9	593.7
Investments in non-current assets (Capex)	EUR m	-141.1	-130.1
Free cash flow	EUR m	641.4	764.3

EMEA		2016	2015	∆ as reported	∆ fx adjusted
Sales	EUR m	4,586.1	4,654.4	-1.5%	0.6%
Operating gross profit*	EUR m	1,064.6	1,024.2	3.9%	6.4%
Operating EBITDA**	EUR m	362.3	353.0	2.6%	5.6%

North America		2016	2015	∆ as reported	∆ fx adjusted
Sales	EUR m	3,828.8	3,600.6	6.3%	6.4%
Operating gross profit*	EUR m	997.5	942.6	5.8%	5.9%
Operating EBITDA**	EUR m	357.3	365.6	-2.3%	-2.2%

Latin America		2016	2015	∆ as reported	∆ fx adjusted
Sales	EUR m	780.9	925.8	-15.7%	-14.0%
Operating gross profit*	EUR m	170.9	201.2	-15.1%	-13.4%
Operating EBITDA**	EUR m	45.9	64.7	-29.1%	-27.6%

Asia Pacific		2016	2015	∆ as reported	∆ fx adjusted
Sales	EUR m	1,010.7	834.1	21.2%	24.6%
Operating gross profit*	EUR m	182.3	140.0	30.2%	33.7%
Operating EBITDA**	EUR m	66.7	50.3	32.6%	35.8%

* While Brenntag reports operating gross profit on segment level, the company reports gross profit on Group level. Operating gross profit is defined as sales less costs of material for goods purchased and supplies, services purchased, packaging materials, supplier rebates and increase/decrease in finished goods. Gross profit is defined as operating gross profit less production/mixing and blending costs.

**The key earnings metric used at Brenntag for segment management is operating EBITDA. Operating EBITDA is the operating profit as reported in the consolidated income statement plus amortization of intangible assets and depreciation of property, plant and equipment. At Group level, operating EBITDA corresponds to EBITDA. Segment operating EBITDA is calculated as segment EBITDA adjusted for holding charges. These are certain costs charged between holding companies and operating companies. At Group level, they net to zero.