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Brenntag grows in second quarter 2012 in more difficult market conditions
09-08-2012: Brenntag looks back on a successful second quarter 2012 despite more difficult macroeconomic conditions. Thanks to the successful growth strategy and the acquisitions closed in 2011 in particular, the Group was able to increase the important key performance indicators gross profit and operating EBITDA in the year-over-year comparison.
Sales increased in the second quarter to EUR 2,490.9 (Q2 2011: EUR 2,173.4 million) and thereby grew by 9.6% based on constant exchange rates (14.6% as reported) compared to the same period in the previous year. Gross profit reached an increase of 4.1% based on constant currency exchange rates (9.8% as reported) to EUR 487.1 million. Operating EBITDA is another important key performance indicator for Brenntag, which in the second quarter once more outperformed the result of the previous year. The result amounted to EUR 184.4 million. This corresponds to a growth of 3.8% based on constant currency exchange rates (10.0% as reported). Profit after tax totalled EUR 81.4 million in the second quarter and therefore increased by 20.4% compared to the same period of the previous year. In the second quarter the earnings per share attributable to the Brenntag shareholders increased by 22.7% compared to the previous year period to EUR 1.57.
Steven Holland, CEO of Brenntag AG: “Brenntag operates successfully even in the current challenging economic conditions. A balance of organic growth, including efficiency gains, and acquisitions has placed our highly diversified group in a strong position to weather the current worldwide economic challenges, which for some regions became more pronounced in the course of 2012. Once again we achieved an increase in the results also in the second quarter. Our high free cash flow in the first half year 2012 gives us stability and security and supports us in staying on our growth path.”
Combined with the first quarter results of 2012, Brenntag was able to increase all relevant earnings parameters in the first half of this year compared to the previous year. Sales increased by 10.0% based on constant currency exchange rates (13.4% as reported) to EUR 4,875.7 million in the first half year 2012. Gross profit increased by 5.7% based on constant currency exchange rates (9.6% as reported) to EUR 962.1 million. The Group generated an operating EBTIDA of EUR 355.9 million that grew by 5.0% based on constant currency exchange rates (9.2% as reported).
Europe proves itself in difficult macroeconomic environment
The region developed well despite the difficult and uncertain macroeconomic situation in Europe. The efficiency enhancement programme implemented in the first quarter already shows positive impacts reflected in the results for the region. Operating gross profit* grew by 1.3% based on constant currency exchange rates (1.9% as reported) to EUR 236.7 million compared to the previous year. The European organization generated an operating EBITDA of EUR 83.8 million for the second quarter of 2012. This corresponds to a growth of 1.1% based on constant currency exchange rates (1.8% as reported).
North America continues to grow in a slower economic development
The business of Brenntag North America is robust and continues to grow. Once more this can be seen in the positive results of the second quarter. Operating gross profit increased by 4.7% based on constant currency exchange rates (16.6% as reported) to EUR 187.3 million. Despite the slightly slower economic dynamic in the second quarter in the USA, the North American organization increased the operating EBITDA to EUR 80.0 million. This corresponds to an increase by 3.4% based on constant currency exchange rates (14.9% as reported). The acquisition of The TER Corporation in July is an important step in the growing market of shale gas.
Latin America continues to grow solid
Once again Brenntag Latin America was able to record positive growth rates. Compared with the prior-year quarter the operating gross profit increased from EUR 38.0 million to EUR 42.9 million, which corresponds to a growth of 5.2% based on constant currency exchange rates (12.9 as reported). The Latin American organization was able to increase the operating EBITDA to EUR 14.6 million. Compared to the same period of the previous year this means an increase of 5.8% based on constant currency exchange rates (12.3 as reported).
Continued, but decelerated growth in Asia Pacific
Although the overall economic situation in Asia-Pacific is still marked by growth, the growth rates have clearly declined compared to the previous year. In this more challenging environment Brenntag was nevertheless able to record positive growth in the region. Operating gross profit increased by 23.6% based on constant currency exchange rates (35.3% as reported) to EUR 25.3 million. Most of this growth can be credited to the acquisition of the Zhong Yung Group. In contrast was the decrease of gross profit of the company in Thailand. The Asian-Pacific organization gained an operating EBITDA of EUR 10.9 million and increased this key performance indicator by 19.8% based on constant currency exchange rates (29.8% as reported).
Strong increase of free cash flow
The Group’s free cash flow amounted to EUR 179.1 million in the first half year 2012 and thus increased significantly by 55.5% compared with the first half of 2011. This positive development is largely due to the significant increase in EBITDA of 9.5%. Furthermore, the increase in working capital was much smaller than in the prior-year period while Capex remained virtually constant.
Brenntag assumes that because of the difficult economic conditions in some countries, regional differences in the growth rates can be seen in the next months as well. Steven Holland, CEO Brenntag AG: “Although we are confident about the future, we remain vigilant and will respond, should we feel further steps are required to position the business defensibly in case the macro-economy deteriorates.” For the time being the Group expects the negative impacts of the flooding in Thailand to decrease and the acquisition of the ISM/Salkat Group in July this year to have a positive influence on the Asia-Pacific region. Furthermore, the company expects to see the full effect of the efficiency-enhancement programme in Europe in the results for the European region in the course of the remaining year.
Assuming no significant fluctuations in the average US dollar exchange rate for the rest of the year and a stable macroeconomic situation, we are expecting operating EBITDA of EUR 705 to 735 million for 2012 as a whole and thus a further increase on the record figure of EUR 660.9 million in 2011.
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