Brenntag Se

Good day, my name is Constantine and I will be your conference operator for today. At this time, I would like to welcome everyone to the Brentag SE second quarter 2024 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star then the number two. If at any time during the call, you need assistance, please press star zero for the operator. I would now like to turn the call over to Thomas Altman, head of investor relations. You may now begin your conference.

Thank you, Konstantin. Good afternoon, ladies and gentlemen, and welcome to the earnings call for the second quarter of 2024. On the call with me today are our CEO, Dr. Christian Kohlweissner, and our CFO, Dr. Christine Neumann. They will walk you through today's presentation, which is followed by a Q&A session. Our relevant documents have been published this morning on our website and can be found at brandhack.com in the investor relations section. In the same area, you will also find the recording of this call later today. Before we begin, allow me to point you to our safe harbor statement, which you will find at the end of the slide deck. With that, I will hand over to our CEO. Christian, over to you.

Well, thank you, Thomas, and good afternoon, ladies and gentlemen. I will start with the highlights of second quarter 2024, and Christine will then walk you through the details of our financial performance. In the second quarter of 2024, we achieved results in line with market expectations, despite a highly competitive business environment. Chemical selling prices remain under pressure in various end markets. Multiple geopolitical challenges and uncertainties keep impacting the overall economic development. However, our sequential volume recovery quarter by quarter materialized as predicted. Chemical manufacturers realized improving capacity utilization rates from depressed levels with less focus on selling prices. Sales for Brentac in the second quarter amounted to around 4 billion euro, which is 2% below the prior year period. Operating gross profit stood at 1 billion euro, which represents a slight increase of around 1%. And our operating EBITDA amounted to 297 million euros, which is a decline of around 10% year over year. Earnings per share stood at 1 euro and 3 cents compared to 1 euro and 23 cents in the second quarter 2023. The combination of the year-over-year weaker performance and higher investments in working capital led to a free cash flow of 158 million euros. This is significantly lower compared to the exceptionally high free cash flow in the prior year period which was characterized by a substantial release of working capital. Our sequential quarter by quarter performance in both divisions showed encouraging improvements compared to the first quarter of 2024. Volumes are continuing to show a sequential recovery across most regions and industries. Despite the pressure on average selling prices, we were able to keep gross profit per unit stable compared to the first quarter, thanks to various margin initiatives, which led as a result to a positive expansion of our gross profit over sales margin. This is a clear success of our commercial teams to manage margins effectively in an intense competitive environment with continuing pressure on chemical prices. As a result, the groups operating second quarter EBITDA could be improved sequentially. On a year-on-year comparison, the higher volumes could slightly overcompensate the lower gross profit per unit margins, but due to higher costs, we achieved an overall lower result. Christine will explain the moving parts on our cost development in more detail later. We have executed further measures to achieve efficiencies, reduce our operating costs, and to counteract inflation-driven cost increases. As presented at the Capital Markets Day in December 2023, the measures target an overall cost takeout in the amount of 300 million euros by 2027. We constantly and carefully evaluate all potential levers across the group including operations and SG&A, as well as our DX and IT-related spend. In light of the performance in the first half of 2024, we will accelerate and expand our cost-out efforts and initiatives. We also continue to optimize our global site network. In 2023, we successfully closed 29 sites, And in 2024, we have closed an additional 10 sites already. Further shutdown measures are in progress or in preparation phase. Now let me say a few words on the outlook. The sequential volume recovery materialized in the first half of 2024 as predicted. Also, we were able to stabilize our gross profit per unit in the second quarter compared to the first quarter due to various margin initiatives. However, the overall market trends and the chemical industry expectations observed recently, particularly in July, indicate that markets will remain highly competitive, which makes us more cautious for the remainder of the year. They indicate sustained pressure on industrial chemical selling prices. Therefore, we do not expect a positive gross profit per unit development in the second half of the year anymore, but rather anticipate a more stable development on group level. In addition, although we still expect volumes to increase sequentially in the second half of 2024, The trends suggest a slightly less supportive volume development than originally expected. Based on these assumptions, we now expect operating EBITDA for the financial year 2024 to be in the range of 1.1 to 1.2 billion euros. Let me provide a quick update on our M&A activities in 2024. Since the beginning of the year, we have signed five acquisitions with a total enterprise value of around 340 million euros, strengthening key focus industries and geographies in both divisions. In Q1, we already highlighted the closing of two acquisitions as well as the signing of Química Delta in Mexico. We also successfully closed the acquisition of Sulventis in June this year, which had already been signed end of 2023. Furthermore, Brentac Essentials signed the acquisition of Industrial Chemicals Corporation, a centrally located chemicals distribution facility and transportation hub in North America. And just recently, we announced the acquisition of Monarch Chemicals, one of the leading distributors of base in agricultural chemicals in the UK with in-house liquid and powder blending facilities. We will continue our M&A execution and are assessing several promising targets in our pipeline in line with our divisional strategies. Another key strategic pillar for Brandtag is sustainability. I would like to emphasize two recent highlights here. Firstly, Brandtag again receives the EcoVadis Platinum status, which puts Brandtag in the top 1% of companies rated across all industries. In fact, Brandtag is now the only chemical distributor with a global EcoVadis Platinum rating, which is the highest possible assessment achievable. And secondly, we have further improved our ISS ESG corporate rating to B-, after being awarded the prime status with a C-plus rating already last year. The rating indicates a very high transparency level on ESG disclosure, as well as industry-leading ESG performance. Also here, Brandec is the only chemical distributor with this rating. These are great achievements by our teams, especially considering that we were able to even further enhance our scores in both assessments compared to last year. Now, let me say a few words on our strategy execution. Despite market headwinds and the challenging environment, we stay in course on executing our strategy while prudently managing our cost base and focusing on running the business. Branta continues to increase divisional autonomy and independence, focusing on areas with the highest value creation and differentiating potential. We are doing this step by step at our own pace and without jeopardizing our operations. We continue to implement a targeted disentanglement in areas with highest differentiating effect. This means we disentangle the customer and supplier facing front end in our divisions. This means fully separated sales team including our also separated global key accounts and a fully dedicated divisional supplier and sourcing management, as well as separated supply chain services and capabilities. We maintain our strong joint backbone of last mile service operations and will formalize service level agreements between Brandtag Essentials and Brandtag Specialties. We continue with the optimization of our legal entity setup, but as indicated at our capital markets day end of last year, the disentanglement of our legal entity structure and our operations will be a longer-term exercise which needs to be carried out prudently. For our support functions, the priority is to focus on continuously optimizing the cost base and pause further disentanglement. Now I would like to hand over to Christine, who will talk about the financial performance in the second quarter in more detail.