Brenntag plans job cuts, site closures under transformation program

Brenntag plans job cuts, site closures under transformation program

MOSCOW (MRC) -- Brenntag has confirmed details of its previously announced transformation program, Project Brenntag, according to Chemweek.

The program is expected to deliver an additional, “sustainable” annualized operating EBITDA contribution totaling EUR220 million (USD260 million) by the start of 2023. The program also involves about 1,300 job cuts and 100 site closures. Brenntag's 2019 operating EBITDA was EUR1 billion on sales of EUR12.8 billion.

Brenntag launched a strategic analysis at the beginning of 2020 as a starting point for the transformation program. The company says that the program is designed to expand Brenntag’s global market-leading position in chemicals and ingredients distribution through an increased focus, reduced complexity, and stronger partnerships with customers and suppliers. Brenntag announced last month that, starting in January 2021, the company would be steered in two global divisions with a focus on changing customer and supplier needs: Brenntag Essentials and Brenntag Specialties.

“With our transformation program Project Brenntag, we take decisive action to create the strong basis for sustainable organic earnings growth in the coming years,” says Christian Kohlpaintner, CEO of Brenntag. “To harvest our full potential, it is crucial to become leaner and more efficient.”

The total net cash outflow to be incurred in course of implementing Project Brenntag is expected to amount to about EUR370 million. The program “will lead to significant efficiency gains and contribute to top-line growth as well,” Brenntag says.

The planned job cuts, to take place over the next two years, represent more than 7% of Brenntag’s total workforce. Less than 200 of the job cuts are expected to be in Germany. Brenntag says it will strive to avoid compulsory redundancies. The measures will be further elaborated over the coming months in line with local rules and labor regulations. “This step will be anything but easy for us, but it is necessary to ensure Brenntag’s success in the long term,” Kohlpaintner says.

The 100 site closures will be across all regions and half will be of third-party logistics sites, Brenntag says. The company says it will also invest in existing and new sites, create regional hubs, and close white spots in its network.

“While maintaining its global reach, with the optimized network Brenntag will improve efficiency, leverage scale benefits across divisions and products, and increase proximity to business partners,” the company says. “The optimization envisions closing sites to consolidate the site network in geographies and improve the utilization of existing sites.”

Brenntag says it will provide further details of the program in a capital markets update on 4 November.

As MRC informed earlier, Brenntag says it has acquired the operating assets of Suffolk Solutions’ (Suffolk, Virginia) caustic soda distribution business. Financial terms of the deal have not been disclosed.

We remind that August production of sodium hydroxide (caustic soda) in Russia were 99,200 tonnes (100% of the basic substance) versus 89,400 tonnes a month earlier, said MRC analysts. Russia's overall output of caustic soda totalled 837,600 tonnes in the first eight months of 2020, down by only 2% year on year.

Petro Rabigh swings to net loss on lower margins, market conditions

MOSCOW (MRC) -- Rabigh Refining and Petrochemical Company (Petro Rabigh) swung to net losses of SAR 610 million in the third quarter (Q3) of 2020, versus net profits of SAR 394 million in the same quarter a year earlier, said Chemweek.

The return to losses was driven by the challenging market conditions and the prevailing coronavirus pandemic, which led to lower refinery margins, according to a bourse statement on Tuesday.

Moreover, the decline in global travel has severely impacted demand for Jet fuel.

Revenues amounted to SAR 7.1 billion in the three-month period ended 30 September 2020, a yearly decrease of 19.3%.

Over the first nine months of the year, the Tadawul-listed firm turned to a net loss of SAR 3.8 billion, against a net profit of SAR 343 million in the year-ago period.

As MRC informed earlier, Sumitomo Chemical and Saudi Aramco have jointly loaned out a total of USD2bn to Rabigh Refining and Petrochemical Co (Petro Rabigh), which faced shortfall of working capital as “the market environment has rapidly deteriorated” since end-2019.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

INEOS announces launch of offering of senior secured notes due 2026

MOSCOW (MRC) -- INEOS Holdings Limited has recently announced that its indirect wholly owned subsidiary, INEOS Finance plc, has launched an offering (the “Offering”) of euro-denominated senior secured notes due March 2026 (the “Notes”), as per the company's press release.

The Offering was done in order to raise, in combination with additional term loan borrowings announced on October 19, 2020 (the “TLB Financing”, and together with the Offering, the “Transactions”), an aggregate principal amount of approximately EUR700,000,000.

INEOS Finance plc intends to use the proceeds from the Transactions for general corporate purposes, including to pay transaction fees and expenses and the payment of future dividends to its parent entities of up to EUR300 million.

There can be no assurance that the Transactions described above will be completed.

As MRC reported earlier, a 660,000-metric tons/year phenol-acetone plant operated by INEOS in Gladbeck, Germany, was will be shut for maintenance from 27 October until 6 December.

Phenol is the main feedstock component for the production of bisphenol A (BPA), which, in its turn, is used to produce polycarbonate (PC).

According to MRC's ScanPlast report, Russia's overall estimated consumption of PC granules in the Russian market reached 58,000 tonnes in January-July 2020, up by 22% year on year (47,500 tonnes).

INEOS Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.

COVID-19 - News digest as of 28.10.2020

1. Elkem swings to net loss due to one-off expenses

MOSCOW (MRC) -- Elkem (Oslo, Norway) has recorded net losses of 97.0 million Norwegian krone (USD10.5 million) in the third quarter compared with net profits of NKr220 million in the same period of 2019, said Chemweek. The result is due to financial expenses of NKr157 million including net interest expenses, losses linked to negative currency effects, and other financial expenses, the company says. Revenue increased 6% year on year (YOY), to NKr5.89 billion driven mainly by the company's silicones division and explained by higher sales volumes and the integration of Polysil, Elkem says. All divisions reported higher YOY sales volumes despite the challenging market conditions, the company says. However, EBITDA and EBIT fell by 20% and 65%, to NKr512 million and NKr99 million, respectively, due to low selling prices and lower sales of specialty products, Elkem says.


Sabic profits rise on higher prices, volumes, reversal of Clariant impairment charges

MOSCOW (MRC) -- Sabic reports a net profit of 1.09 billion Saudi riyals (USD290 million) for the third quarter, a 47% rise year on year (YOY), due to higher product prices, increased sales volumes, and improved margins, according to Chemweek.

Sales declined 11% to SR29.30 billion compared with the prior-year period, with EBITDA down 26% YOY to SR5.67 billion.

Improved economic activity in the third quarter and an average Brent crude oil price up 50% compared with the second quarter were reflected in the improved product prices, volumes, and margins, says Sabic CEO Yousef al-Benyan. Sales volumes were 8% higher compared with the second quarter and average selling prices rose 11% quarter on quarter, although feedstock costs also increased with the average price of naphtha increasing 45%. Sales and EBITDA rose 19% and 62%, respectively, compared with the second quarter, when Sabic reported a net loss of SR2.22 billion. Sabic says its firm commitment to cost control resulted in EBITDA margins of 19% for the third quarter, up from 14% in the second quarter.

The company has also reversed write-downs related to Clariant, which offset some impairments in other assets. This resulted in non-recurring gains in the quarter of SR690 million “primarily due to the reversal of impairment provisions associated with Clariant,” compared with non-recurring charges of SR1.18 billion recorded in the second quarter, it says. Sabic holds a 31.5% stake in Clariant.

Sabic is maintaining its 2020 outlook, with global GDP expected to contract this year before an improvement is seen in 2021, says Benyan. “However, even without the COVID-19 impact, supply still exceeds demand for our key products, which will continue to pressure product prices and margins for the foreseeable future,” he says.

The implementation phase of Sabic’s alignment as the chemical arm of Saudi Aramco also got under way in the third quarter, “positioning it well to achieve long-term growth and to create and deliver value for its stakeholders,” according to the company. The portfolios of the two companies “complement one another, and we are both global organizations with a deep understanding of the worldwide marketplace,” Benyan says.

Sabic marketed a USD1.0-billion dual-tranche bond offering in September on the Taiwan stock exchange, demonstrating the company’s “agility and robustness to market conditions and its attractiveness for a diverse investor base looking for different tenors, which stimulated demand and drove favorable prices,” he says. The company also remains “committed” to driving sustainability forward in the chemicals industry, he adds.

In its petrochemicals business unit, Sabic’s largest, the company reports third-quarter sales of SR25.55 billion, up 20% on the second quarter. Average selling prices rose 13% and sales volumes were up 7% compared with the previous quarter, it says. EBITDA was up 63% compared with the second quarter at SR5.31 billion. Ethylene glycol (EG) prices improved in the third quarter due to a reduction in supply coupled with an improvement in demand, especially in polyester and polyethylene terephthalate (PET) bottle resin across regions, it says. Methanol demand also began recovering in the third quarter. In its polyethylene (PE) unit, prices rose in the third quarter, supported by steady demand and better macroeconomics conditions, according to Sabic. Polypropylene (PP) prices also improved compared with the previous quarter, supported by healthier demand from automotive and steady demand for applications such as personal hygiene, it says. Polycarbonate prices also rose in Asia following an increase in feedstock prices, it adds. “Demand for automotive, construction, and electrical appliances improved from the low levels observed in the second quarter of 2020. However, an increase in demand may be offset by increased supply from announced capacity additions,” Sabic says.

The company’s agri-nutrients business saw sales slip 1% to SR1.57 billion compared with the previous quarter, driven by a 5% fall in sales volumes that offset a 4% increase in average selling prices. Urea prices increased in the quarter due to tighter supply-and-demand balances, with favorable farming conditions across multiple regions, it says. Demand improved in India, Southeast Asia, and South America, and outages in the Middle East, Southeast Asia, and the Black Sea/Baltic region tightened supply, Sabic says.

Earlier this month Sabic and Aramco announced plans to expand the scope of their proposed joint crude-oil-to-chemicals project in Saudi Arabia, with the project now to include the integration of the existing Yanbu complex. Sabic earlier this year suspended all capital expenditure (capex) except nondiscretionary capex for safe and reliable operations and late-stage projects.

As MRC reported earlier, Saudi Aramco and Saudi Basic Industries Corporation (SABIC) have decided to reevaluate their crude-oil-to-chemicals project in Yanbu on the kingdom's west coast, according to an Oct. 18 statement on the Tadawul stock exchange, as they slash spending due to low prices. The USD20 billion project may be downsized to use Aramco's existing facilities in the port city, instead of building a new plant, the statement posted by SABIC said. "Both parties intend to re-evaluate the scope of the crude-oil-to-chemicals (COTC) complex project and study the integration of Saudi Aramco's existing refineries in Yanbu with a world-scale mixed feed steam cracker and downstream olefin derivative units," the statement said.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the world's market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.