Brenntag reports increased operating EBITDA
Brenntag lifted its key performance indicators operating gross profit and operating EBITDA at Group level in the second quarter of 2019. The growth in operating EBITDA is mainly attributable to the initial application of IFRS 16, the new financial reporting standard on leases.
The further downturn in the macroeconomic environment had a noticeable impact on the quarterly results, especially in the two large regions EMEA and North America. In light of the current trend in earnings performance and the macroeconomic growth outlook, Brenntag decided in July to revise its forecast for full-year 2019: the group still expects to see growth in operating gross profit. For operating EBITDA, it forecasts an increase on a like-for-like basis of between 0 percent and 4 percent (before 3 percent – 7 percent).
Brenntag generated sales of €3,254.3 million in the second quarter of 2019, a year-on-year decrease of 1.2 percent on a constant currency basis (+1.2 percent as reported). Brenntag’s key performance indicator operating gross profit reached €722.9 million, an increase of 4.1 percent on a constant currency basis (+6.8 percent as reported). Operating EBITDA was up by 12.2 percent year on year at constant currency rates (+15.1 percent as reported) to €266.3 million.
The growth in operating EBITDA is mainly attributable to the initial application of the new financial reporting standard IFRS 16. The effect of this IFRS on Group operating EBITDA amounts to €28.3 million in the second quarter.
Profit after tax was up on the prior-year figure of €118.3 million to €125.4 million in the second quarter of 2019.
At €179.1 million, free cash flow was up significantly on the prior-year quarter’s figure (€147.9 million). This is due primarily to the lower increase in working capital compared with the second quarter of 2018.
Steven Holland, Chief Executive Officer of Brenntag AG, said, “The second quarter confirmed that there has been no significant improvement of the underlying business environment, and overall business sentiment remains weak. Despite this, however, we achieved operating EBITDA on a par with the previous year on a like-for-like basis.”
EMEA negatively impacted
The EMEA (Europe, Middle East & Africa) region saw a continuation of the trend of recent months. The market environment continued to turn down, providing no impetus, and demand remained weak. Against this background, Brenntag EMEA generated operating gross profit on a par with the previous year at €292.8 million. Operating EBITDA was up by 6.5 percent on the prior-year figure to €108.7 million.
North America sees downturn in operating activities
Brenntag North America recorded noticeably weaker demand and a downturn in the macroeconomic environment in the course of the second quarter. This led to lower growth rates in our business. Overall, the acquisitions made a positive contribution to earnings. Compared with the prior-year quarter, operating gross profit rose by 5.1 percent to €313 million. Operating EBITDA reached €127.8 million, an increase of 11.6 percent.
The growth in operating EBITDA in the two large regions EMEA and North America is mainly attributable to the initial application of the new financial reporting standard IFRS 16.
Latin America delivers another good quarter in an environment of continued volatility
Brenntag Latin America continued its positive performance into the second quarter of 2019, generating good operating results in a still-difficult economic environment. Operating gross profit rose by 7.9 percent to €44.8 million. Operating EBITDA was up by 57 percent to €13.4 million.
Further growth in Asia Pacific
In the Asia Pacific region, Brenntag achieved further growth in the second quarter of 2019. The acquisitions made a positive contribution to this. Operating gross profit rose by 15 percent to €67.6 million. Operating EBITDA was up by 25.1 percent on the prior-year figure to €25.5 million.
Revised forecast for full-year 2019
In light of the current trend in earnings performance and the deterioration in the macroeconomic environment, Brenntag decided in July to revise its forecast for full-year 2019: the Group still expects to see growth in operating gross profit.
On a constant currency basis, based on the same financial reporting standards and including acquisitions, it now forecasts an increase in operating EBITDA of between 0 percent and 4 percent (previously: between 3% and 7%). This range means that reported operating EBITDA for the Brenntag Group will be somewhere between €995 million and €1,030 million in financial year 2019, assuming that current exchange rates do not change materially in the course of the year and the effect of the initial application of IFRS 16 is approximately €100 million.
Steven Holland said, “We have revised our forecast for operating EBITDA to reflect the currently difficult trends and macroeconomic outlook. Although we are now more cautious as regards the further course of the year, our resilience, broad diversification and successful acquisitions will help us to continue to grow.”
For more information visit www.brenntag.com
12th August 2019