[ID] => 10634
[post_author] => 5714
[post_date] => 2019-02-20 12:42:03
[post_date_gmt] => 2019-02-20 12:42:03
[post_content] => Weak economic conditions in many territories, exchange rate uncertainties and rising costs have all made life difficult for international operators in the chemical supply chain over the past year but end-year figures issued by some of the biggest global chemical distributors show there is room for improved profitability if the right strategy is chosen. Univar and Nexeo Solutions, which Univar is due to take over soon, along with DKSH have all reported growth in 2018, despite pockets of poor performance.
Univar, for instance, reported 2018 net income of $172.3m, up from $119.8m in 2017, with adjusted EBITDA up 7.8 per cent at $640.4m. "We continued to improve on our global execution in the fourth quarter despite challenges in Canada and softer than forecasted demand from most industrial end markets," says David Jukes, Univar’s president and CEO. "In particular, improved sales force and operational execution in our USA segment drove adjusted EBITDA growth in a quarter when customer demand and purchasing behaviour was dampened by macroeconomic uncertainty."
For the year as a whole, revenues from US external sales grew by 6.5 per cent to $4.96bn, while those in the EMEA region increased by 8.5 per cent to $1.98m. Canadian sales fell 5.0 per cent to $1.30bn and ‘Rest of the World’ sales were down 2.6 per cent at $393.5m.
SOMETHING FOR THE WEAK END
While 2018 as a whole was good, it ended weakly. Looking more closely at the fourth quarter, Univar detected “cautious buying behaviour”, especially in October and December. Nevertheless, sales grew by 2.8 per cent despite volumes that were essentially flat compared to fourth quarter 2017. There was a small improvement in EBITDA margin, which Univar says reflects continued margin management and improving execution, despite an unfavourable shift in the product mix with a higher proportion of bulk commodity chemicals, which pushed up freight expenses.
Soft demand in the energy markets in western Canada and persistent challenges in the weather-impacted agriculture business negatively affected results for the Canada segment in the fourth quarter. In the EMEA region, on the other hand, continued double-digit growth in the focused Industries line of business and a more favourable product mix drove growth of 7.9 per cent in adjusted EBITDA, excluding the impact of currency movements, despite signs of economic uncertainty. There were notable improvements in both gross margin and adjusted EBITDA margin due to improved mix and effective cost management.
Elsewhere, strong performance in Mexico was offset by softness, particularly late in the quarter, in Brazil.
Univar is now forecasting adjusted EBITDA for the full year 2019 very much in line with 2018, absent the Nexeo Solutions acquisition. It is expecting industrial production growth to slow, which should be compensated for by a recovery in its Canadian agricultural business and continued improvement in sales force efficiency. It is, though, somewhat nervous about currency movements and says there is limited opportunity for an improvement in freight and transport costs. It also expects a slightly higher tax burden and will miss a one-off $8m gain booked in the USA segment in first-quarter 2018.
Nexeo Solutions’ latest results relate to the first quarter of its 2019 fiscal year, and show revenue growth of 1 per cent but a decline in net income from $26.5m a year ago to $16.2m. “While our first quarter performance reflects some deflationary and macroeconomic headwinds, we remain focused on continued execution of our strategic priorities in any environment,” says president/CEO David Bradley.
The increase in sales and operating revenues largely reflected a 4 per cent increase in average selling prices, mainly as a result of higher sales of speciality products in North America. This was partially offset by a decrease in volumes and currency losses of some $8.8m as a result of weakening exchange rates for various currencies against the US dollar.
Quarterly gross profit fell from $106.9m to $98.7m over the year, hampered by a deflationary environment late in 2018 that compressed margins and led to lower demand, with customers reducing inventory levels ahead of anticipated lower process.
“The merger with Univar is on track to close and by combining the best of the best, Univar Solutions will be well-positioned strategically and financially to deliver increased value to our shareholders and worldwide industry partners," Bradley says. Working together with Univar, Nexeo has subsequently agreed to sell its plastics distribution business to One Rock Capital Partners for $640m; the deal is expected to close in the first half of the year, after the acquisition of Nexeo by Univar.
CHANGING IT UP
Switzerland-headquartered DKSH achieved an increase in net sales of 3.1 per cent to SFr 11.34bn for the full year 2018, with profit after tax increasing by 22 per cent over 2017 to SFr 260.3m. Operating profit of SFr 263.6m was below last year’s SFr 297.0m.
“The three business units, healthcare, performance materials and technology, reported increased results,” says Stefan P Butz, CEO of DKSH. “With the divestment of the healthcare business in China, we realised a sizeable profit. However, in a challenging market environment, performance in business unit consumer goods was significantly below last year. Therefore, we have started to restructure the business. This will impact the first half of 2019, though we are confident that results for the business unit will be better than in 2018 due to the started measures.”
DKSH also announced two acquisitions in growing and highly profitable business segments during 2018. In June, it acquired Davies Foods’ beverage business in New Zealand and in December signed an agreement to acquire Auric Pacific’s distribution business in Singapore and Malaysia.
DKSH chairman Dr Joerg Wolle announced in 2018 that he will step down from the board at this year’s AGM. Adrian T Keller, honorary chairman, says: “On behalf of the entire Board of Directors and management, I would like to thank Dr Joerg Wolle for his highly appreciated leadership over the past decades. He played a key role in establishing DKSH as a leading market expansion service provider in Asia.” Theo Siegert, David Kamenetzky and Robert Peugeot are also due to step down from the Board of Directors; proposals for new members will be published along with the invitation to the AGM, which will take place on 21 March.
[post_title] => Results: Stacking up
[post_status] => publish
[comment_status] => open
[ping_status] => open
[post_name] => results-stacking-up
[post_modified] => 2019-03-07 12:05:14
[post_modified_gmt] => 2019-03-07 12:05:14
[post_parent] => 0
[guid] => https://www.hcblive.com/?p=10634
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