Commentary: Distributors go from strength to strength

26 March 2012 00:00  [Source: ICB]

Chemical distribution may be a relatively small sector compared with the rest of the industry, but it seems to be an attractive place to be, especially if you are one of the major global players.

Germany's Brenntag published its 2011 results last week, showing a healthy increase in sales and profits across all regions. Sales grew by 15.4% to €8.68bn ($11.4bn), while operating earnings before interest, tax, depreciation and amortization (EBITDA) grew by 12.2% year-on-year (based on constant exchange rates) to €660.9m. Although they did not break out the fourth quarter or show the effect of acquisitions, the results demonstrate how well the company - a bellwether for the sector - resisted the fourth-quarter collapse that affected many chemical producers. Even in Europe, which suffered a substantial slowdown in economic growth through the second half of the year, Brenntag achieved a 6% boost to EBITDA, at constant exchange rates, to €303.9m.

The company also benefited from restructuring its debt. Lower repayments following its initial public offering allowed profit after tax to soar by more than 90% to reach €279.3m. Distributors like to say they are downturn-resistant because buyers switch from producers to distributors to purchase smaller quantities more often. Perhaps they are right.

By: Will Beacham
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