Brenntag's Q3 earnings miss, shares tumble

Investing.com -- Shares of Brenntag (ETR:BNRGn ) dropped by over 8% following its third-quarter results, which posted mixed performance across its business segments and significant one-time losses. 

Brenntag's third-quarter revenue and gross profit aligned closely with market expectations, coming in at €4.07 billion and €1.02 billion, respectively. 

However, its operating EBITDA and EBITA lagged behind, missing consensus estimates by 2% and 4%, respectively, due to increased operational costs across both the Essentials and Specialties divisions.

“This, we think, is a clear sign of continued pricing pressure in the Essentials business,” said analysts at Barclays (LON:BARC ) in a note.

In particular, the company's net income took a substantial hit from an unexpected €63 million loss related to the recent sale of Raj Petro in India, contributing to a 25-34% shortfall in earnings relative to forecasts. 

The financial strain was exacerbated by elevated expenses from special items, which surged to €58 million compared to €24 million a year earlier. 

This combination of operational pressures and one-time impacts ultimately led to Brenntag's EPS dropping nearly 30% year-over-year.

Despite this disappointing earnings performance, Brenntag maintained its fiscal-year guidance for operating EBITA between €1.1 and €1.2 billion. 

The company attributed its steady forecast to proactive cost-management initiatives, which it expects to offset the ongoing margin pressures and the prolonged downturn in industrial chemical sales. 

Morgan Stanley (NYSE:MS ) analysts remain cautious, noting that Brenntag's Essentials segment, while showing a slight increase in volume, continues to face declining gross profit per unit, reflecting the challenges of maintaining profitability amid rising costs.

 “We think the net impact of all these factors could be a focus on the call and we current model a net neutral impact,” said analysts at Barclays.

Source: Investing.com