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Brenntag reports volume and gross profit growth in Q3 2024
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Thursday, 14 November, 2024, 12 : 00 PM [IST]
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Essen, Germany
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Brenntag, the global market leader in chemicals and ingredients distribution, unveiled its financial results for the third quarter of 2024, with rising volumes and gross profit growth despite an overall challenging business environment. Various pricing initiatives as well as cost containment measures showed an impact but could not compensate for volume-related increased expenses and inflationary impacts.
Christian Kohlpaintner, chief executive officer of Brenntag SE, said, “The chemical markets Brenntag is serving are experiencing an extended bottoming out of the industry cycle, characterised by strong competition and pressure on average chemical selling prices. In this challenging environment of the third quarter 2024, our teams in both divisions worked intensively to further grow volumes sequentially and thus succeeded in raising gross profit year-over-year. Our cost-saving measures are showing positive effects and we made good progress in executing our divisional strategies. However, we cannot be satisfied with the outcomes yet and need to step up our efforts: Performance improvement is key. While we pursue a targeted disentanglement of our divisions, we put strong emphasis on portfolio optimization, differentiated steering, and cost-takeout. Our priorities are running our business in challenging times and doing our extensive homework. This creates the most value and serves the interest of our stakeholders best.”
Financial Performance
In the third quarter 2024, the sequential volume recovery continued as predicted on group level. The company reached sales of 4,068.8 million EUR which is on par with the previous year’s quarter (+0.7%). Despite stable sales, its operating gross profit came in at 1,019.2 million EUR which is 3.2% above Q3 2023, proving the effectiveness of the pricing measures in both divisions. Operating EBITA decreased by 4.9% year-on-year and stood at 281.1 million EUR. On a year-on-year comparison, the higher volumes could again over-compensate the lower gross profit per unit margins, but due to higher volume driven costs and inflationary impacts, it achieved an overall lower result. Earnings per share stood at 0.82 EUR (Q3 2023: 1.18 EUR), impacted by one-time effects, mainly related to the sale of Raj Petro Specialties in India. Working capital increased to 2,147.6 million EUR, resulting in an annualized working capital turn of 7.7 times, which is above last year’s turn (Q3 2023: 7.2). With 246.8 million EUR the free cash flow in the third quarter of 2024 was 44.1% below the strong free cash flow in Q3 2023 (441.6 million EUR). This is the result of weaker operating performance compared to last year in combination with stable working capital whilst funds for working capital were released in the prior year period.
Divisional performance shows positive trends
In Q3 2024, both Specialties and Essentials continued executing their divisional strategies. Specialties made good progress in refining and improving its product and service portfolio quality. Essentials continued implementing its “triple” business strategy by strengthening the Last Mile Service Operations setup. Both divisions focus on price and margin management, which remains a top priority for the remainder of the year.
Specialties reported an operating gross profit of 300.8 million EUR which is an increase of 2.9% compared to Q3 2023. Operating EBITA came in at 119.9 million EUR, a decline of 3.9% compared to the previous year’s quarter. The year-on-year decline was caused by higher costs, partly driven by M&A and volume-related increases in transportation costs. Most business units in the Life Science segment except Pharma saw a positive operating gross profit development year-over-year, mainly driven by higher gross profit per unit generation. In Material Science, the operating gross profit performance was higher compared to the relatively weak Q3 2023, due to M&A contributions and improved market conditions in CASE & Construction.
Essentials reached an operating gross profit of 718.4 million EUR, which is an increase of 3.3% compared to the previous year’s quarter. The positive volume development reported in all regions was able to offset lower gross profit per unit in EMEA and North America, leading to an increase in absolute gross profit in these segments and for the division overall. All segments of Essentials were negatively impacted by volume-driven increases in transport costs, as well as inflationary trends. Operating EBITA in the third quarter 2024 declined to 186.3 million EUR (-9.8%).
Kristin Neumann, chief financial officer of Brenntag SE, said, “Our comprehensive cost containment program is in full execution since the beginning of the year and is already making a positive contribution to our underlying cost development across the organization. For 2024, we target savings of around 50 to 60 million EUR and aim to roughly double them in 2025. We have a clear plan to achieve our communicated 300 million EUR annual cost-out effect by 2027.”
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