12-Nov-2010 - Brenntag AG

Brenntag with continued strong growth

Profit after tax more than doubled to EUR 43.3 million

Brenntag again reports strong growth. In the third quarter of 2010 Brenntag’s sales increased by 25.4 % to EUR 2.02 billion (Q3 2009: EUR 1.61 billion). For the same period, the key performance indicator gross profit reached EUR 429.7 million (Q3 2009: EUR 373.7 million), which corresponds to a considerable growth rate of 15 %. Also, operating EBITDA substantially improved by 16.7 % to EUR 160.3 million (Q3 2009: EUR 137.4 million). Brenntag’s profit after tax in the third quarter more than doubled to EUR 43.3 million (Q3 2009: EUR 19.9 million).

Regarding the segments, Brenntag achieved again exceptional growth rates in the Asia Pacific Region. In addition, North America provided excellent results, accompanied by a positive development in Europe.

Nine-month figures also show strong growth in gross profit and operating EBITDA which alongside the ongoing global economic recovery, further support the full year expectations for 2010.

On October 1, 2010, the former majority owner of Brenntag, Brachem Acquisition S.C.A., owned by funds advised by BC Partners Limited, Bain Capital, Ltd. and subsidiaries of Goldman Sachs International, placed 11 million Brenntag shares with institutional investors, leading to a freefloat exceeding 50 %. The higher liquidity of the share will help to attract interested investors all around the world.

Stephen Clark, CEO of Brenntag: “The ongoing strong global demand for our products and services affirms the successful work the entire Brenntag team is carrying out every day. We have the fundamentals in place to continue our growth track and successful integration of acquired companies into the Brenntag world. We play an active role in consolidating the market and aim to further profit from outsourcing trends. In addition, the results of our efficiency and restructuring measures along with the continued realization of scale benefits contribute to improved earnings.”

In a comparison to the first nine months of 2009, Brenntag reports positive business results. Brenntag’s group sales reached EUR 5.71 billion, corresponding to a significant growth rate of 18.6 %. Gross profit improved by 10.6 % to EUR 1.23 billion (first nine months of the previous year: EUR 1.11 billion). Operating EBITDA amounted to EUR 447.6 million, increasing by 14.3 % from EUR 391.7 million in the first nine months of 2009.

Growth in Europe continuing

Brenntag Europe reported ongoing positive growth rates in the third quarter of this year, primarily based on a pleasing development of volumes. Operating gross profit improved in comparison to the reference period of the previous year by 4.8 % from EUR 208.3 million to EUR 218.2 million. Operating EBITDA increased by 7.1 % from EUR 70.7 million in the third quarter of 2009 to EUR 75.7 million in this year’s third quarter.

Excellent results in North America

Like the second quarter, Brenntag North America showed continued strong growth in the third quarter as well. Operating gross profit significantly grew by 20.3 % to EUR 165.6 million compared to EUR 137.6 million in the third quarter of the previous year. At constant exchange rates, operating gross profit increased by 7.3 %. Operating EBITDA reached EUR 72.2 million in the third quarter after EUR 56.9 million in the corresponding pre-year quarter, which is equivalent to a growth rate of 26.9 %. Adjusted for exchange rate effects, the growth rate was 14.1 %. Through the acquisition of certain assets of the Industrial Chemicals & Solvents division of Houghton Chemical Corporation in July, Brenntag increased its market share in the New England states and further strengthened its market position in North America.

Overall positive development in most Latin American countries

Brenntag Latin America’s operating gross profit grew by 8.1 % from EUR 32.1 million in the third quarter of 2009 to EUR 34.7 million. However, at constant exchange rates operating gross profit decreased by 4.5 %. Operating EBITDA reached EUR 11.0 million after EUR 12.6 million in the reference period of the previous year, corresponding to a negative growth rate of 12.7 %. Adjusted for exchange rate effects, the negative growth rate amounted to 21.3 %. In Latin America, Brenntag’s results were clearly negatively influenced by unfavorable political developments and the finance policy in Venezuela. Excluding Venezuela, the Latin America segment achieved double-digit growth in operating gross profit as well as in operating EBITDA on a constant currency basis in the third quarter of 2010.

Acquisition of EAC supports Brenntag’s growth in Asia Pacific significantly

Brenntag Asia Pacific continued to report very positive results in the third quarter of the current financial year. Operating gross profit more than quadrupled from EUR 4.0 million in the third quarter of the previous year to EUR 16.2 million. Excluding currency effects, the growth in operating gross profit more than tripled. Operating EBITDA significantly increased, reaching EUR 6.0 million in the third quarter after EUR 1.3 million in the same period of the prior year. This again corresponds to a growth rate of more than three times the previous year’s result at constant exchange rates. This excellent result, whilst being primarily supported through the acqusition of EAC Industrial Ingredients A/S, was also aided by strong organic growth in our existing business. The acquisition, which was announced at the beginning of July, enabled Brenntag to become one of a few pan-Asian distributors and is the platform to capitalize on future opportunities in this fast growing region.

High positive free cash flow despite financing of significant business growth

The company’s free cash flow in the first nine months in 2010 amounted to EUR 223.1 million. Working Capital management improved further. Despite a significant increase in working capital based on the strong business development, the annualized working capital turnover rate rose from 9.0 in the first nine months of the previous year to 10.4 in the reporting period.

Prospects: Brenntag confirms its positive full-year expectations

Based on the combination of ongoing positive business development in the past months and the favourable global economicclimate, Brenntag confirms its expectations regarding operating EBITDA for the full year 2010. Under the assumption that the US-dollar exchange rate will stay relatively stable at the recent level until the end of the year, Brenntag continues to expect an operating EBITDA of EUR 570 million to EUR 600 million. This would yield an increase of 18 % or 25 % respectively compared to prior year.

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