Germany's Brenntag warns of lower earnings as poor economy hits demand

Brenntag has warned that full-year earnings will not meet previous guidance after the company experienced challenging macro-economic conditions in North America and Europe, Middle East and Africa (EMEA), the German chemicals distributor said this week.

The company said that it now expects full-year operating earnings before interest, tax, depreciation and amortisation (EBITDA) to grow between 0% and 4%, compared with previous guidance of 3% to 7% (comparable basis - constant exchange rates and same accounting standard).

Brenntag experienced a noticeable slowdown in demand in June after good business development during April and May, it said.

“During the second quarter of 2019, the macroeconomic environment weakened noticeably in the two main Brenntag regions," it said.

"In addition, important indicators for Brenntag as well as the company's own market assessment point to a continued difficult environment in the course of this year,” the statement said.

It is still assumed that growth rates in the second half of the year will be higher than in the first half.

Based on preliminary unaudited figures, second-quarter operating EBITDA rose 15% to about €266m.

First-quarter operating EBITDA rose 12% to €238.8m.

Brenntag will publish financial results for Q2 and a forecast for the full year 2019 on 7 August.

Last week, Germany's chemicals major BASF also warned that earnings would not meet previous guidance.

It forecast full year earnings before interest and tax before special items would collapse by up to 30% compared to previous guidance of a 1-10% rise.

This would take its earnings back to below post–financial crisis levels.

The chemical industry is experiencing a big drop off in demand across many value chains in all key regions.

This is linked to the US-China trade war which has hit consumer confidence and cut economic growth.

There have been double-digit falls in production for key end use markets such as automotive.