Brenntag continues its growth path and reports very strong results in the second quarter of 2022 in a macro-economic market environment that has been and remains highly challenging. The severe geopolitical uncertainties add to the continued pressure on global supply chains. Brenntag’s two global divisions, Brenntag Specialties and Brenntag Essentials, continued their strong growth seen at the beginning of the year, resulting in a very positive first half of 2022.
Christian Kohlpaintner, Chief Executive Officer of Brenntag SE, said “Brenntag continues on its growth path, achieving very strong results in the second quarter of 2022 with excellent organic growth in both divisions. We are particularly pleased by the progress of our ambitious transformation program Project Brenntag, which will achieve our targets already by the end of 2022, one year ahead of plan. We expect from the remaining transformation initiatives an additional positive operating EBITDA impact for 2023, which will be quantified later this year. Our full year results are now expected at the upper range of our upgraded guidance provided in June.”
In the second quarter 2022, Brenntag generated sales of 5,061.2 million EUR. Operating gross profit rose by 28.0% to 1,144.8 million EUR compared to 838.7 million EUR in previous year’s quarter. Operating EBITDA reached 533.8 million EUR, a strong year-on-year increase of 41.0%. Earnings per share totaled 1.86 EUR which represents more than a doubling of last year’s EPS.
“In the highly challenging environment of the first half of 2022, product availability as well as prompt and reliable delivery were once again key for Brenntag’s success. We were able to translate the positive gross profit growth into an over-proportional operating EBITDA growth, which is reflected in a very strong conversion ratio for the group of 46.6%”, comments Kristin Neumann, Chief Financial Officer of Brenntag SE.
Both divisions with continued strong performance and earnings
Both divisions strongly contributed to the results in the second quarter. The financial results of Brenntag Specialties and Brenntag Essentials demonstrate our ability to translate the differentiated steering of our operating model into strong earnings. In Q2 2022, the overall market environment for the divisions was impacted by inflationary cost development as well as supply shortages and increased transport costs. In this environment, Brenntag managed to maintain deliveries to customers and utilize business opportunities.
Brenntag Specialties, which builds on Brenntag’s position as the largest specialty chemicals and ingredients distributor worldwide, showed another very strong quarterly performance. The division accomplished an operating gross profit of 461.4 million EUR (+42.2%). Operating EBITDA amounted to 234.1 million EUR, an increase of 55.5% compared to the previous year’s quarter, driven mostly by strong organic growth that was once again broad-based across all segments. All focus industries showed double-digit growth rates.
Brenntag Essentials, which markets a broad portfolio of process chemicals across a wide range of industries, showed substantial, almost entirely organically driven growth in the second quarter of 2022. The division reached an operating gross profit of 672.6 million EUR (+19.5%). Operating EBITDA increased by 29.6% to 320.9 million EUR compared to the prior-year period. Except for APAC, all segments contributed to the strong development. Overall, the severe pandemic related lockdowns in China in Q2 2022 weighed on the division’s operating EBITDA in APAC.
“Project Brenntag” targets to be achieved one year earlier
The transformation program Project Brenntag progresses very well. By the end of 2022 the planned operating EBITDA contribution will be achieved – one year ahead of schedule. Since inception and as per Q2 2022, Project Brenntag has contributed 195 million EUR of additional annualized operating EBITDA, which is around 90% of the FY 2023 target of 220 million EUR. All initiatives of the program are well on track: 85 sites across all regions are closed and around 1,060 jobs have been structurally reduced in a socially responsible manner. As we continue to work on the full implementation of the various Project Brenntag initiatives, the company expects to see an additional positive operating EBITDA impact in the FY 2023 which will be quantified later this year.
Outlook:
Brenntag confirms its operating EBITDA guidance to be in the range of 1,750 million to 1,850 million EUR for the financial year 2022, as stated in the announcement in June 2022. Based on current business momentum, we now expect to reach the upper range of the guidance. After very strong results in the first half of 2022 and in light of the feedback from customers and suppliers, Brenntag is confident to maintain solid earnings throughout the third quarter of 2022, with some level of normalization in Q4. The overall geopolitical, macroeconomic, and operational conditions are expected to remain highly challenging. Supply chains continue to be under severe pressure, impacting production and supply. However, Brenntag has navigated the different challenges of the past two years very prudently. With its resilient business model and high diversification, the company feels well positioned to manage particularly difficult conditions pro-actively and with foresight.
