Brenntag Shares Drop After Mixed Q3 Results

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.