PROJECT BRENNTAG IS A COMPREHENSIVE, MULTI- YEAR PROGRAMME TO FURTHER DEVELOP THE COMPANY.
Brenntag has been an internationally successful company and global market leader for many years now. Over the past decade, the Group has grown considerably, expanding its presence in places such as the Asia Pacific region, where it now has more than 2,000 employees. However, it has recently become increasingly difficult for us to generate organic growth; that is, growth from within. Our international profile and the acquisitions we have made have led to increased complexity in both our site network and in internal processes. Project Brenntag addresses these aspects of our company with the clear aim of achieving sustainable organic growth in future and thus creating added value for our stakeholders.
Georg Müller, the Group’s Chief Financial Officer since 2012, says: “On Project Brenntag, we analyzed the diverse areas of our company in detail and planned substantial improvements. We are now in the process of implementing the measures and driving the Group’s repositioning. We know our business, chemical distribution, and have the best specialists on our workforce. But we need to carry out some adjustments in order to make Brenntag more efficient again. Project Brenntag will make a sustainable annual contribution to the growth in operating EBITDA of around EUR 220 million. The contribution will increase from year to year and we will reach the full annual potential in 2023. The measures to increase operating EBITDA are spread mainly across the “Operating Model”, “Go-to-Market Approach” and “Site Network Optimization” workstreams. Most of the additional contribution to operating EBITDA comes from cost savings and is therefore fully within our control.”
Some of the initiatives will have a positive impact as soon as 2021. Particularly notable examples include indirect procurement, our price management and working capital management. “In terms of our efficiency in working capital management, we at Brenntag look especially at working capital turnover and placed increased focus on this back in 2020. And with success: we were able to raise our working capital turnover from 7x to 7.3x year-over-year in 2020,” says Georg Müller.
Of course, a comprehensive transformation programme like this also entails costs. The net cash outflows for Project Brenntag amount to around EUR 370 million. “We expect a third of this total to comprise capital expenditure and two thirds to comprise expenses to achieve our efficiency measures,” explains Georg Müller.
Project Brenntag was set up to capture the underlying market growth. So initially, it is not about gaining additional market share. “Our aim is to achieve organic growth in operating EBITDA of 4% to 6%. We will also continue to acquire companies and plan to spend between EUR 200 million and EUR 250 million a year on this,” explains Chief Financial Officer Georg Müller. When making future acquisitions, Brenntag will sharpen its focus: we will concentrate on emerging markets in Latin America and Asia Pacific – and in the latter case primarily on China! In addition, we wish to further expand specialty chemicals and ingredients and are seeking relatively large acquisition targets that will make a noticeable contribution to our operating EBITDA.
Georg Müller: “Project Brenntag is a comprehensive, multi-year programme to further develop the company. Brenntag has had strong, stable foundations for many years. We will build on those foundations and are now working in various areas of the Group to increase Brenntag’s efficiency over the long term.”