ESSEN (dpa-AFX) - The chemicals trader Brenntag has started 2024 with a sharper decline in profits than expected. "We are not satisfied with our performance," said CEO Christian Kohlpaintner in a statement on Tuesday. The difficult market conditions with geopolitical tensions and ongoing inflationary trends led to price pressure and lower than expected demand in certain markets. This had an impact on the results. Brenntag is becoming more cautious for the year as a whole and is now only aiming for the lower end of the target range for adjusted earnings before interest, taxes and goodwill amortization (operating Ebita).

This was not well received on the stock market. The share fell by more than eight percent in early trading, bringing it to the bottom of the DAX. According to analyst Christian Obst from Baader Bank, the chemicals trader had a subdued start to the year. Analyst Suhasini Varanasi from Goldman Sachs saw the same weak trends for the Essen-based company at the start of the year as for industry colleagues IMCD and Azelis. The outlook, which has been shifted to the lower end of the target range, implies a consensus correction of four percent. Expert Chetan Udeshi from JPMorgan also finds the new targets optimistic.

Brenntag felt the effects of weaker demand in the first quarter. Sales shrank by almost 12 percent year-on-year to around four billion euros. The operating result fell by almost a quarter to 259.7 million euros. The bottom line was a profit attributable to shareholders of 141.4 million euros after 215.9 million a year earlier. On average, analysts had expected a higher operating profit.

For the year as a whole, the Group now only expects to achieve the lower end of the profit forecast of 1.23 to 1.43 billion euros issued in March. In the worst case scenario, this would mean a decline in adjusted earnings before interest, taxes and goodwill amortization (operating EBITA) compared to the previous year.

In order to reduce costs, the Management Board headed by CEO Kohlpaintner introduced further measures in the summer. The company closed 25 locations and cut more than 400 jobs, as CFO Kristin Neumann said in March. More than 1,300 jobs had already been cut and 100 locations closed by the end of 2022. Brenntag plans 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 this to result in significant efficiency gains and savings in administrative costs, expenses and the supply chain.

The specialties 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./mne/nas/jha/