(new: statements from conference call, analysts, share price)

ESSEN (dpa-AFX) - Chemicals trader Brenntag is cautious about the current year after a decline in sales and earnings. "We expect the business environment to remain challenging in 2024," said CEO Christian Kohlpaintner in a conference call on Thursday. This will be characterized by geopolitical uncertainties and macroeconomic challenges. Added to this is the uncertain outcome of important political elections. At the same time, however, overall demand is likely to improve. Brenntag's management has already seen a slight, gradual recovery in sales volumes over the course of 2023. "We expect these trends to continue."

Investors on the stock market were less than convinced, with the share falling by more than four percent in the afternoon, bringing it to the bottom of the DAX. Investors were disappointed that the company did not buy back any more shares. The strong inflow of funds had fueled expectations that there would be "further returns to shareholders", wrote analysts from investment house Stifel. The disappointment that these did not materialize is now weighing on the share price.

The first quarter got off to different starts in the two divisions, said Brenntag CEO Kohlpaintner. In the industrial chemicals business, there was good volume growth in North America, but also in Europe. In the specialty chemicals business, however, this upturn in volume is not yet apparent. In Asia and China, too, the Group has not yet seen a significant turnaround in the first two months.

For the current year, Brenntag expects a slight decline in operating profit in the worst-case scenario. The Group is targeting adjusted earnings before interest, taxes and goodwill amortization (operating EBITA) of 1.23 to 1.43 billion euros.

According to expert Christian Cohrs from the analyst firm Warburg Research, the company's results were below his expectations. The same applies to the statements on future development. Meanwhile, the cash flow has developed favorably. For UBS expert Rory McKenzie, the profit and the targets for the current year were in line with expectations. Profits are still under pressure, but this is easing.

Last year, the chemicals trader felt the effects of weaker demand. Turnover shrank by 13.5 percent to 16.8 billion euros. A stronger euro also had a negative impact - adjusted for currency effects, the decline amounted to eleven percent. Adjusted for special effects, earnings before interest, taxes and goodwill amortization fell by 16.3 percent to 1.27 billion euros.

A profit of just under 715 million euros was attributable to shareholders after almost 887 million a year earlier. The company's figures fell short of analysts' expectations. The Brenntag management wants to increase the dividend by 10 cents to 2.10 euros per share.

In order to reduce costs, the Board of Management headed by CEO Kohlpaintner introduced further measures in the summer. The company closed 25 locations and cut more than 400 jobs, according to CFO Kristin Neumann. More than 1,300 jobs had already been cut and 100 locations closed by the end of 2022. Brenntag aims to save a total of 300 million euros over the year to 2027. The company had put the one-off costs at 250 million euros.

Meanwhile, the Group is pressing ahead with the separation of its two divisions. The businesses with process chemicals (Essentials) and specialties for certain industries (Specialties) are to be set up independently by 2026. Brenntag expects the independence of the two divisions to result in significant efficiency gains and savings in administrative costs, expenses and the supply chain.

The specialty business in particular should develop better as a result. According to Kohlpaintner, the division is lagging behind its competitors and this gap is to be closed. The management will then examine various strategic options. It remains to be seen whether the company will be split up.

Activist investors, whose sights have been set on the chemicals trader, have been pushing for a split into the two divisions for specialty and basic chemicals. The British financial investor Primestone in particular attracted attention. Primestone and the US hedge fund Engine Capital are hoping for a rapid increase in value.

Brenntag trades internationally in industrial and specialty chemicals and ingredients. The company buys the substances from chemical groups in large quantities and sells them in smaller quantities. In recent years, Brenntag has grown with the help of smaller acquisitions.

The company is generally less affected by economic downturns than chemical groups because customers then need fewer chemicals and increasingly buy them from distributors rather than producers. Most recently, Brenntag employed more than 17,700 people in 72 countries./mne/tav/jha/