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Brenntag sales slide on declining demand due to COVID-19, earnings relatively stable

August 07/2020

MOSCOW (MRC) -- Brenntag, the worldwide market leader in chemical and ingredients distribution, reports a 1.9% year-on-year (YOY) decrease in second-quarter net profit to EUR123.0 million (USD145.1 million) on sales of EUR2.8 billion, down 13.4%, mainly attributable to declining demand due to the COVID-19 pandemic. Operating gross profit slipped 1.0% YOY to EUR715.9 million and operating EBITDA rose 3.7% to EUR276.2 million, reported Chemweek.

The company says its second-quarter results were solid and demonstrate resilience. Brenntag says it had still limited impact from the pandemic in the quarter, but that it expects tougher conditions and high uncertainty in the rest of the year. Although we reported solid results in the second quarter with the COVID-19 pandemic still having limited effects on our business performance, we have noticed declining demand in various customer industries, and uncertainty with regard to further developments remains high in the markets, says Christian Kohlpaintner, CEO of Brenntag. The positive performance in the first six months gives us a sound foundation for the second half of the year, which we expect to be even more challenging.

Free cash flow reached EUR213.7 million in the second quarter, up from EUR179.1 million in the second quarter of 2019. This represents an increase of 19.3% and is the highest second-quarter free cash flow the company has generated since its initial public offering in 2010.

Brenntag says its business in EMEA achieved a relatively strong quarter, mainly driven by customer industries such as cleaning, pharmaceuticals, and personal care, with regional operating gross profit of EUR314.6 million, up 7.4% YOY, and operating EBITDA jumping 19.7% to EUR130.1 million. Sales fell 9.7% YOY to EUR1.2 billion.

The company says the market environment in North America remained difficult, impacted by clear declines in the business with customers of the oil and gas industry, as well as by the COVID-19 pandemic, with sales dropping 15.0% YOY to EUR1.0 billion. Operating gross profit in the region was down by 7.6% to EUR289.3 million and operating EBITDA fell 8.4% to EUR117.1 million.

Brenntag suspended its 2020 forecast in early April due to uncertainty over the future effects of the COVID-19 pandemic. The company says it will update its forecast as soon as the effects on Brenntags further business performance in 2020 can be reliably determined. Brenntag says that, given high uncertainty in the global economy, it cannot rule out a larger impact from COVID-19 on its business development.

Brenntag initiated a holistic analysis of the company at the beginning of 2020 as a starting point for a comprehensive transformation program to set the base for sustainable organic earnings growth. The project has entered the next phase, which consists of validating conclusions and initiatives that have been developed in recent months, the company says. Details of the program, called Project Brenntag, will be provided when the company publishes its third-quarter 2020 results in early November.

As MRC reported earlier, since 1 February 2014, Brenntag has startied distributing the cellulosic additive and latex powder portfolio of Dow Construction Chemicals in Germany and Austria.

We remind that Dow Chemical began major maintenance on the LHC 1 cracker at Terneuzen, Netherlands  from 9 September, 2019. More than 1,500 extra employees from various external companies carried out maintenance work in the subsequent period. LHC stands for Light Hydro Carbons, or hydrocarbons. The cracker splits naphtha - a derivative of crude oil - into hydrocarbons such as ethylene and propylene. These are the raw materials for the other Dow factories that make chemicals and plastics from them. Together with two other naphtha crackers, LHC 1 forms the heart of the Terneuzen Dow site.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Brenntag is the global market leader in full-line chemical distribution. Linking chemical manufacturers and chemical users, Brenntag provides business-to-business distribution solutions for industrial and specialty chemicals globally.  The value-added services include just-in-time delivery, product mixing, formulation, repackaging, inventory management, drum return handling as well as extensive technical support. Headquartered in Mulheim an der Ruhr, Germany, the company operates a global network with more than 400 locations in 70 countries.
Author:Margaret Volkova
Tags:Europe, PP, PE, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, adhesives, Brenntag, Dow, Austria, Germany, Netherlands, Russia.
Category:General News
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