German chemicals distributor Brenntag announced that it would reorganise its business into two separate divisions from 2024. “The plan contains the further operational and legal disentanglement of Brenntag Essentials and Brenntag Specialties leading towards two distinct, high-performing divisions with full business autonomy supported by a lean Corporate Center,” the company said on the Capital Markets Day.

Christian Kohlpaintner, Chief Executive Officer Brenntag SE, said: “The advanced operating models of our two divisions are testament to Brenntag’s determination to reflect the true nature of our business environment and our willingness to transform. Our customers and suppliers have already sorted themselves into the Specialties and the Industrial world. Our two autonomous and independent divisions will bring us even closer to market developments and our customer and supplier needs.”

“With this disentanglement, we are creating the optionality and are ready for the next strategic steps by 2026. Building on market trends, Brenntag continues to shape the industry and leverage the growth opportunities that arise for Brenntag Essentials and Brenntag Specialties from these trends and changes. We enhance Brenntag’s value creation and are on our path to be the market leader across all dimensions,” Kohlpaintner added.

The company also presented additional details on strategic steps and product portfolio shifts to sharpen the profiles of the divisions and enhance their value proposition along market requirements. In addition, Brenntag introduces further cost take-out measures to realize efficiency gains.

Brenntag is progressing in executing its ‘Strategy to Win’, announced in November 2022. With its “Advanced Operating Model”, announced in July 2023 and go-live in January 2024, the company is now focusing on further strengthening the ability of its divisions for differentiated steering and sharpening their profiles. This includes a new governance and steering structure of the divisions via divisional CEOs and Executive Committees.

In addition, specific functions and responsibilities will be shifted from the corporate level to the divisions to empower them for autonomous business steering, to enhance their decision-making and improve their business performance, supported by a lean corporate center. Moreover, the company will create dedicated legal entity structures for both divisions along their new organizational setup, starting at the beginning of 2024.

In addition, Brenntag executes a decisive Product Portfolio Steering. All Pharma activities will be transferred from Brenntag Essentials to Brenntag Specialties, whilst the Water Treatment and Finished Lubricants business as well as specific semi-specialty products from the Specialties segments will move to Brenntag Essentials. These shifts will sharpen the divisional profiles aligned with specific customer and supplier needs and increase the coherence within the division regarding the business model and the product portfolio.

As a result of the shifts, Brenntag Essentials will account for 70% of the Group’s current gross profits with a conversion ratio of 31 to 33%. Brenntag Specialties will account for 30% of the gross profits but with an increased conversion ratio of 38 to 40%. The changes in the portfolios will be reflected in Brenntag’s reporting structure from the Q1 2024 results onwards. Brenntag Specialties will switch from a regional segment reporting to a reporting in two global industry segments, Life Science and Material Science. Brenntag Essentials will continue to be reported in regional segments.

With the ambitious financial targets for both divisions, reflecting their increased focus, the Brenntag Group expects to grow its organic gross profits by 4 to 7% annually, its organic EBITA by 7 to 9% annually, and to achieve a conversion ratio of 35 to 37% by 2027.