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Brenntag plans job cuts, site closures under transformation program

October 29/2020

MOSCOW (MRC) -- Brenntag has confirmed details of its previously announced transformation program, Project Brenntag, according to Chemweek.

The program is expected to deliver an additional, “sustainable” annualized operating EBITDA contribution totaling EUR220 million (USD260 million) by the start of 2023. The program also involves about 1,300 job cuts and 100 site closures. Brenntag's 2019 operating EBITDA was EUR1 billion on sales of EUR12.8 billion.

Brenntag launched a strategic analysis at the beginning of 2020 as a starting point for the transformation program. The company says that the program is designed to expand Brenntag’s global market-leading position in chemicals and ingredients distribution through an increased focus, reduced complexity, and stronger partnerships with customers and suppliers. Brenntag announced last month that, starting in January 2021, the company would be steered in two global divisions with a focus on changing customer and supplier needs: Brenntag Essentials and Brenntag Specialties.

“With our transformation program Project Brenntag, we take decisive action to create the strong basis for sustainable organic earnings growth in the coming years,” says Christian Kohlpaintner, CEO of Brenntag. “To harvest our full potential, it is crucial to become leaner and more efficient.”

The total net cash outflow to be incurred in course of implementing Project Brenntag is expected to amount to about EUR370 million. The program “will lead to significant efficiency gains and contribute to top-line growth as well,” Brenntag says.

The planned job cuts, to take place over the next two years, represent more than 7% of Brenntag’s total workforce. Less than 200 of the job cuts are expected to be in Germany. Brenntag says it will strive to avoid compulsory redundancies. The measures will be further elaborated over the coming months in line with local rules and labor regulations. “This step will be anything but easy for us, but it is necessary to ensure Brenntag’s success in the long term,” Kohlpaintner says.

The 100 site closures will be across all regions and half will be of third-party logistics sites, Brenntag says. The company says it will also invest in existing and new sites, create regional hubs, and close white spots in its network.

“While maintaining its global reach, with the optimized network Brenntag will improve efficiency, leverage scale benefits across divisions and products, and increase proximity to business partners,” the company says. “The optimization envisions closing sites to consolidate the site network in geographies and improve the utilization of existing sites.”

Brenntag says it will provide further details of the program in a capital markets update on 4 November.

As MRC informed earlier, Brenntag says it has acquired the operating assets of Suffolk Solutions’ (Suffolk, Virginia) caustic soda distribution business. Financial terms of the deal have not been disclosed.

We remind that August production of sodium hydroxide (caustic soda) in Russia were 99,200 tonnes (100% of the basic substance) versus 89,400 tonnes a month earlier, said MRC analysts. Russia's overall output of caustic soda totalled 837,600 tonnes in the first eight months of 2020, down by only 2% year on year.
Author:Margaret Volkova
Tags:kausticheskaya soda, petrochemistry, adhesives, Brenntag, Germany, Russia.
Category:General News
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