- Stable gross profit and strong cash flow: Gross profit* at 1,046 million EUR in Q1 2023 was on par with strong Q1 2022. Operating EBITA** normalized with 345 million EUR (-13%)*** in line with expectations and guidance. Very strong free cash flow of 449 million EUR was at nine times the prior-year level and presents a record in a first quarter.
- Mixed divisional performance: Brenntag Essentials performed very well in Q1 2023 with single-digit growth of operating EBITA to 224 million EUR (+3%) despite the continued challenging market conditions. Brenntag Specialties performance with an operating EBITA of 153 million EUR was in line with expectations, below the level of the exceptionally strong prior-year quarter (-26%) and ahead of Q4 2022 results. The company observed a gradual monthly improvement in demand throughout Q1.
- Strategy execution on track: Various “Strategy to Win” measures successfully implemented in both divisions, including M&A and new sites in Brenntag Essentials APAC, the opening of several Innovation & Application Centers for Brenntag Specialties in Asia-Pacific, and the Go-Live of Salesforce in selected regions in the USA.
- Guidance 2023 confirmed: Unchanged, Brenntag expects the Group’s operating EBITA for the financial year 2023 to stay between 1,300 million and 1,500 million EUR.
According to the company’s website press release on May 10, 2023, Brenntag (ISIN DE000A1DAHH0), the global market leader in chemicals and ingredients distribution, recorded a solid start into 2023 and achieved in the first quarter results in line with expectations. With 449 million EUR, the free cash flow was at nine times the prior-year level and presents a record in a first quarter. Brenntag Essentials performed very well and accomplished further growth in operating gross profit and operating EBITA compared to the already strong previous year. The Brenntag Specialties results were impacted by declines in volumes in several industry segments but need to be viewed against an exceptionally strong first quarter last year.
Christian Kohlpaintner, Chief Executive Officer of Brenntag SE: “In a continued challenging macro-economic environment with ongoing geopolitical uncertainties and strong inflationary trends, we achieved first quarter results in line with our expectations and guidance. Sales and operating gross profit could be kept stable compared to the exceptional strong level of the prior-year quarter. Operating EBITA normalized according to our expectations and guidance. As anticipated, the Brenntag Group showed a sequentially stronger performance relative to Q4 2022. We observed a gradual monthly improvement in demand, with early indications for a positive Q2 volume development continuing. This is an additional motivation to our colleagues across the world who are relentlessly working on realizing business opportunities and further developing our company in this tough operating environment.”
Financial performance
With 4,527.1 million EUR Brenntag generated sales on par with previous year’s results (-1.0%). Brenntag’s operating gross profit reached 1,045.6 million EUR, which is at equal level (-0.3%) as the very strong prior-year quarter. Operating EBITA reached 345.1 million EUR, a decline of 13.1% compared to Q1 2022. The very strong free cash flow creation of 449.2 million EUR exceeded the previous year's figure by more than nine times and presents a record in a first quarter. Earnings per share stood at 1.40 EUR (Q1 2022: 1.61 EUR) which marks the second best first quarter result in Brenntag’s history.
Kristin Neumann, Chief Financial Officer of Brenntag SE: “Overall, Brenntag’s financial performance in the first quarter 2023 was in line with our expectations and our guidance. The very high free cash flow is an extremely pleasing result and shows the first impact of our increased focus on working capital management. With the same discipline, we will continue executing on our growth strategy in both divisions, our digital, data and excellence transformation as well as our sustainability and M&A strategy.”
Global business divisions measure up to exceptionally strong Q1 2022
In Q1 2023, Brenntag saw a mixed picture in its divisions’ results with a weaker performance in Brenntag Specialties and encouraging growth in Brenntag Essentials. The results particularly in the Specialties division need to be viewed against an exceptionally strong first quarter 2022.
Brenntag Specialties, the global go-to service partner for innovative and sustainable solutions for specialty chemicals and ingredients, reported weaker results, but still according to the expectations. The division reported an operating gross profit of 388.2 million EUR (-9.2%). Operating EBITA reached 153.0 million EUR, a decrease of -26.2%. The results were affected by negative volume developments. In some industries there was low demand because customers reduced previously built-up inventories. In addition, focus industries such as Nutrition and Personal Care / HI&I could not repeat the exceptionally strong prior year. The industry segment Pharma showed an encouragingly strong performance, but due to its comparably small size in the Life Science segment could not fully compensate for lower demand in the other Life Sciences industries.
Brenntag Essentials, the market leader shaping the future of industrial chemicals distribution across a wide range of industries, continued its growth path and delivered strong results in Q1 2023 despite the ongoing challenging market conditions. The division’s operating gross profit grew by 5.9% to 648.1 million EUR. Operating EBITA reached 224.3 million EUR, an increase of 3.2% above Q1 2022. The positive development of operating EBITA in the EMEA and North America segments with double-digit growth rates was almost entirely based on organic growth. While the decline in the APAC segment was due to lower demand in all APAC regions, particularly in China, the Latin America segment was impacted by a sharp drop in demand in Brazil.
Transformation journey and strategy execution are progressing
The company continues to consequently execute its ambitious growth strategy “Strategy to Win” with various measures and initiatives across the global organization. The program comprises dedicated growth strategies for both divisions, Brenntag Specialties and Brenntag Essentials, guided by the conviction that both divisions require differentiated steering and dedicated strategies tailored to the respective markets they are operating in, to accelerate sustainable growth above industry and to further expand their respective leading market positions.
In the first months of 2023, Brenntag Specialties executed several steps to implement the divisional “Strategy to Win”, including the acquisition of a new Water Treatment facility in South Africa and the openings of two Innovation & Application Centers, one for Pharma in Singapore and one for Material Sciences in Mumbai.
Brenntag Essentials made an important step forward with the signing of the acquisition of Aik Moh Group, significantly expanding its industrial chemicals and value-added services footprint in South-East Asia, as well as the opening of a new facility in Zhangjiagang, China.
With its Digital.Data.Excellence (DiDEX) growth driver, Brenntag will enhance efficiency, growth, and excellence across the organization and transform the company from its core to become a data and tech-driven enterprise and industry leader that is easiest to do business with. In Q1 2023, as part of the DiDEX program, first Salesforce applications were rolled out in pilot regions in the USA, only six months after project kick-off.
Brenntag will continue its path of capability building and structural adjustments with the adequate speed and consequent decision making required to secure successful strategy execution in both divisions and for Brenntag as a whole while implementing the required changes in its operating model. At a Capital Markets Day planned in autumn of this year, an update on the execution of Brenntag’s “Strategy to Win” and the further evolvement of the organizational setup will be presented.
Guidance for 2023 confirmed
Brenntag confirms the guidance presented in March 2023. The company expects 2023 to remain a continuously tough operating environment, characterized by geopolitical concerns, macro-economic challenges but also a sequentially recovering demand. Unchanged, Brenntag Group’s operating EBITA for the financial year 2023 is expected to be between 1,300 million EUR and 1,500 million EUR.
Financial Results at a glance – Q1 2023
