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Brenntag starts into the fiscal year 2012 with continued earnings growth
15-05-2012: Brenntag continued to grow earnings in the first quarter of 2012. Earnings development was supported by organic growth as well as through the contribution of acquisitions made in 2011, especially the Multisol group in Europe and the Zhong Yung group in China.
Sales increased by 10.4% based on constant exchange rates (12.1% as reported) to EUR 2,384.8 million (Q1 2011: EUR 2,127.1 million). More relevant, gross profit, one of the key performance indicators for Brenntag, reached EUR 475.0 million (Q1 2011: EUR 434.4 million) and thereby increased by 7.4% based on constant exchange rates (9.3% as reported). The second key performance indicator, operating EBITDA, improved to EUR 171.5 million (Q1 2011: EUR 158.1 million) which corresponds to a currency adjusted growth rate of 6.3% (8.5% as reported). Adjusted for the net effect of expenses related to efficiency measures that are currently being implemented in Europe and further non-recurring effects (about EUR 3 million) operating EBITDA amounted to EUR 174.5 million.
Brenntag’s profit after tax amounted to EUR 79.4 million (Q1 2011: EUR 66.9 million) in the first quarter, reflecting a growth rate of 18.7%. Equally strong, earnings per share grew from EUR 1.30 in previous year’s quarter by 18.5% to EUR 1.54 in the first quarter 2012.
Steven Holland, CEO of Brenntag AG: “We were again able to grow all our relevant earnings parameters. However, against the background of the somewhat volatile macro-economic environment and a generally weaker economic outlook we will not rest on our laurels. As part of our strategy of sustainable and efficient growth we implemented an accelerated programme of efficiency gains in Europe to progressively increase our internal efficiency, measured by the conversion ratio of operating EBITDA to gross profit whilst retaining the capacity and capability to promote our growth strategies in a more challenging business environment. With these efficiency measures implemented and considering the ongoing growth of the chemical distribution market, combined with our focus on attractive growth segments, we expect to continue growing all relevant earnings parameters excluding exchange rate effects in 2012, as well.”
All regions reported earnings growth, which especially in the Europe and the Asia Pacific segment was partly due to the contribution of acquisitions concluded in 2011.
Europe growing, but, impacted by non-recurring costs for efficiency-enhancing measures
In Europe, Brenntag reported positive growth rates in the first quarter of 2012. In the year-over-year comparison operating gross profit increased by 4.8% (based on constant exchange rates and as reported) to EUR 238.7 million, which was partly attributable to the contribution made by the Multisol group acquired in the fourth quarter of 2011. The operating EBITDA was impacted by expenses of some EUR 10 million in connection with efficiency-enhancing measures that are currently being implemented. By contrast, the release of a provision relating to the final settlement of a third-party claim led to income of some EUR 7 million. As a result the impact of the non-recurring costs on the operating EBITDA of the segment was somewhat offset, it rose to EUR 79.6 million, which correspond to a growth rate of 1.5% (based on constant exchange rates and as reported).
North America continues to grow strongly
Brenntag North America, which was supported by an improved economic development in the USA, remained on its strong growth path and showed earnings growth for the eighth consecutive quarter. Compared with the prior-year quarter operating gross profit grew by 10.1% based on constant exchange rates (14.6% as reported) from EUR 155.7 million to EUR 178.5 million. The acquisition of G. S. Robins in May 2011 contributed to this favourable growth. Operating EBITDA rose even stronger. While in the first quarter 2011 the segment recorded an operating EBITDA of EUR 63.2 million it reached EUR 73.9 million the first quarter 2012 (12.3% based on constant exchange rates, 16.9% as reported).
Latin America remains on growth track
In an environment of stagnating industrial production Brenntag Latin America again reported convincing results in the first quarter of 2012. Operating gross profit increased from EUR 35.8 million in the first quarter of the previous year to EUR 40.6 million in the first quarter of 2012. This corresponds to a currency adjusted growth rate of 9.4% (13.4% as reported). Operating EBITDA grew even stronger by 11.6% based on constant exchange rates (14.4% as reported) from EUR 11.8 million in the first quarter of 2011 to EUR 13.5 million in the corresponding period of this year.
Growth in Asia Pacific, but flood effects in Thailand still with negative impacts
Brenntag Asia Pacific continued to grow in the first quarter of 2012, while the overall economy continues to expand but at a slower pace than in the prior-year period. Operating gross profit rose by 16.0% on a constant currency basis or 20.1% as reported to EUR 23.9 million. This growth is mainly due to the contribution made by the Zhong Yung group acquisition. By contrast, in the first quarter of 2012, the operating gross profit of Brenntag’s Thai company was severely impacted by the effects of the flooding in the fourth quarter of 2011. Overall operating EBITDA for Asia Pacific increased by 5.0% based on constant exchange rates (8.2% as reported) from EUR 9.8 million in the first quarter of 2011 to EUR 10.6 million in the first quarter of this year.
Strong free cash flow
The free cash flow reached EUR 77.9 million in the first quarter of 2012 in comparison to EUR 47.9 million in the corresponding period of last year. The positive development of free cash flow was supported on the one hand, by the growth of EBITDA by 8.7% and, on the other hand, by the fact that the increase in working capital was lower than in the first quarter of 2011. Capex virtually remained at the prior-year level demonstrating Brenntag’s commitment to maintaining its facilities according to the standards whilst at the same time adjusting its facilities to the expected increases in business volumes. The strong free cash flow generation will continue to support Brenntag’s strategy of concluding value accretive acquisitions and underscores the high level of resilience in more challenging economic environments inherent in the business model.
Further growth in all relevant earnings parameters expected for 2012
Brenntag expects to see all relevant earnings parameters grow. Operating gross profit should continue to increase. The rise in operating EBITDA is likely to be higher than the growth of operating gross profit thanks to efficiency improvements. Brenntag believes that the market for chemical distribution will grow, also in the long term, both as a result of momentum from the development of the global economy and the sustained trend towards chemical producers outsourcing their distribution activities to distributors. Brenntag’s broad market presence will enable the company to participate in this trend in the next few years and, by focusing on attractive growth segments and steadily enhancing the efficiency, we expect an above-average benefit from this trend.
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