07 October 2013 09:40 [Source: ICIS news]
BERLIN (ICIS)--Brenntag’s CEO Steve Holland said on Sunday the company expects in 2014 to see organic growth in Europe following encouraging signs this year that the region’s economy is turning a corner.
Holland was speaking on the sidelines of the 47th annual European Petrochemical Association (EPCA) meeting in Berlin.
“We believe the region is stable to positive now. After 2-3 years of pretty hard work in Europe we are starting to see signs of improvement,” he said.
“What is encouraging is that in the second quarter 2013 we reported some small organic growth in Europe and our feeling at the moment, macro economically is that it is sustainable and we certainly see more positive development in Europe."
Around 45% of Brenntag’s revenue comes from Europe, with 40% from America and the rest from the Asia Pacific and Latin America.
In June, Moody’s raised the outlook of Brenntag’s credit rating to “positive” from “stable” as a result of the chemical distributor's steady operating performance in the face of challenging market conditions.
Moody's lead analyst for Brenntag said the positive outlook recognised the company's ability "to maintain a stable financial performance even under persisting weak general economic conditions in its reference European markets, given its large scale and the breadth of its geographic and product diversification, which underpin its strong business profile".
The analyst added: "The change in outlook also acknowledges the progress made by the company in improving its credit metrics, and our expectation of its ability to gradually achieve further improvements over time."
Moody's expects Brenntag will achieve in 2013 "low single-digit" growth in revenue and earnings before interest, tax, depreciation and amortisation (EBITDA), mainly because of the expected full-year positive impact of a number of small bolt-on acquisitions the company completed in the second half of 2012 and early 2013.
Holland is unable to comment on the third-quarter financial performance of the company prior the reporting period in November, but said Brenntag’s stance that it is well-positioned to take on the still-challenging market conditions and record a higher gross profit in 2013, had not changed.
Earlier this year the company, while announcing a dividend proposal of €2.40 per share, said it expected gross profit and operating EBITDA before possible one-off effects, to grow in the current year, following its successful 2012, when gross profit improved 4.6% year on year to €1.9bn, while sales revenues rose 7.7% to €9.7bn.
Holland added Brenntag has a pipeline of acquisition targets which it is constantly reviewing.
“We guide to spend between €200-250m annually on acquisitions. Generally, we try to target this but clearly you also have targets that are in due diligence, which do not necessarily run by calendar,” he said, adding that the company still had the capital expenditure for further deals this year if needed.
“Brenntag had a very successful acquisition strategy in the past which built a strong infrastructure - we have now over 450 sites in 70 countries. This has given us above average growth potential.
“In addition to that, we see a lot of suppliers and customers which wish to reduce complexity. And they can reduce complexity by dealing with a distributor who has a wider access of products and services.
“We want to be the fastest growing and safest distributor wordwide,” Holland said.
The EPCA meeting runs from 5-9 October.
($1 = €0.74)
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