Chemicals retailer Brenntag is continuing the operational and legal unbundling of its two business areas, Essentials and Specialties, as part of its strategic restructuring.
The two divisions are to become two independent, high-performance divisions with full business autonomy, supported by a lean corporate headquarters, as the DAX group announced on the occasion of its Capital Markets Day in London.
In the course of this, the product portfolio will also be adjusted. All pharmaceutical activities will be transferred from Brenntag Essentials to Brenntag Specialties, while the Water Treatment and Finished Lubricants businesses as well as certain semi-specialty products from the Specialties segments will transfer to Brenntag Essentials. “These shifts sharpen the profiles of the two business areas with regard to the specific customer and supplier needs,” says Brenntag.
“With the unbundling that has now been initiated, we are creating options and preparing Brenntag for the next strategic steps by 2026,” said CEO Christian Kohlpaintner, according to the statement.
The implementation of the “Strategy to Win” program presented in November 2022 is making good progress, Brenntag also announced.
Brenntag is now targeting annual growth in organic earnings before interest, taxes, depreciation and amortization (EBITA) of 7 to 9 percent at group level by 2027. A year ago, the group expected an annual growth rate of 6 to 8 percent.
This is how the Brenntag share reacts – and the analysts
Brenntag shares continued their correction from the most recent annual high of 79.76 euros on Tuesday. With a loss of around 0.5 percent to 77.50 euros, the chemicals trader’s shares landed in one of the lower DAX 40 places on their capital market day. At its peak it had lost 2.7 percent, but was able to stay above the 21-day line as a technical chart indicator for the short-term trend and has made up some ground since then. Since the beginning of the year there has been an increase of almost a third.
With a view to the new medium-term targets, Suhasini Varanasi from Goldman Sachs sees scope for market consensus. The goals represent a further development compared to the previous investor event. UBS analyst Rory McKenzie still believes Brenntag is undervalued and sees options for a turnaround or a split of the company.
Meanwhile, analyst Chris Counihan from the investment house Jefferies wrote in an initial assessment that fundamental changes such as such a split would probably not occur at the DAX group before 2026. This morning, Brenntag had simply announced that the Essentials and Specialties divisions were to be developed into two independent divisions with full business autonomy, supported by a lean corporate headquarters.
Some investors may have hoped for faster action. Brenntag was recently targeted by activist investors. The British financial investor Primestone, which holds a good two percent of Brenntag, is particularly drawing attention. Primestone and the US hedge fund Engine Capital want a split. Investors hope that this will result in a rapid increase in value.
“Management’s plans are more of a marathon than a sprint,” commented Baader Bank analyst Christian Obst. In recent quarters it has already been shown that restructuring and investments in various projects such as IT had a dampening effect on the quarterly results.
Chetan Udeshi from JPMorgan bank also pointed out the costs of separating the business areas and the savings program. These were significantly higher than he expected.
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