Ladies and gentlemen, thank you for standing by. Welcome to the Brenntag SE Q3 2026 results call and live webcast. Please note that this call will be recorded. During today's call, webcast participants will be in a listen-only mode while we conduct the question- and- answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. Instructions will also follow at the time of the Q&A. I would now like to turn the call over to André Simon, Senior Vice President, Corporate Investor Relations. Please go ahead.
Thank you, Stefan. Good afternoon, ladies and gentlemen, and a warm welcome to our third quarter 2026 call. With me today are our CEO, Jens Birgersson, and our CFO, Klaus Weisener. Our pre-recorded management presentation and all accompanying materials are available on our investor relations website. We will move directly into the Q&A today. A replay of the session will be available on our website shortly after the call. As always, please note our safe harbor statement at the end of the analyst presentation. With that, Stefan, please open the line for questions.
Thank you. We will now open the line for Q&A. If you would like to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. You will receive a prompt to unmute, and once your name has been announced, please unmute and ask your question. If you wish to withdraw your question, please lower your hand and use the raised hand function. Thank you. A moment, please, for the first question. Our first question will come from Annelies Vermeulen from Morgan Stanley. Please unmute your line and ask your question.
Hi. Can you hear me?
Yes. Thank you.
Hi. Good afternoon. Hi, I'm Annelies from Morgan Stanley. I have two questions, please. Firstly, on your cost savings plan, assuming you hit the EUR 150 million target for this year, the plan implies about EUR 35 million of cost out in Q4 relative to the EUR 47 million you did in Q3. But given the inflation that you're seeing in energy, transport, and freight costs, do you see scope to try and deliver more than EUR 150 million for the full year to try and offset some of those inflationary pressures? That's the first one.
Then secondly, you've talked a lot about the success of your commercial initiatives, but these measures that you've taken have coincided with a period of better pricing and volume stabilization in your end markets. How are you measuring the real underlying impact of your commercial initiatives? I appreciate you might cover this in detail tomorrow at the CMD, but any comments you can give here would be helpful. Thank you.
Right. Let me start with the cost savings plan. You're right that obviously we continue to accelerate our cost-saving initiatives and have delivered EUR 47 million of cost savings in the third quarter, which leaves EUR 35 million for the fourth quarter. We are very well on track to deliver the EUR 150 million for the full year, and we are very confident to achieve these. It's a little bit too early to say that actually we will be exceeding on that, but please note one other technical effect that in the fourth quarter, we are actually lapping the first savings that we have already achieved on this program where we've actually had a significant cost saving already in the year before.
We are measuring against a slightly higher target, if you actually look from that perspective there. Having said that, let me reiterate, we are very well on track to achieve the EUR 150 million, and we are very confident to achieve the EUR 150 million.
Yeah. Annelies, it's Jens here, I'll take the second question. Just a comment to 150. Some of the cost reductions are people cost reductions, and some of these reductions are dependent on union agreement before we can actually execute on the action. So when we talk about the 150 for the year, we feel confident to have that this year, but to give an accurate forecast of it, where certain job reductions might slip into January because of one meeting with the union and cetera. So you also have some timing uncertainties in December, and we have considered that and feel confident that we deliver the 150. Okay, moving on to the success of the commercial impact. We will talk tomorrow about building the commercial machine at the Capital Markets Day. That's no secret. We haven't transformed the whole Salesforce yet. We are doing experiments.
We're putting a cockpit in place to measure that we have things like reactivated customers that have gone inactive, obviously tracking lost customer rate and pure, totally new won customers and simple things like, how many days in the street does a salesperson spend, and how many customers does he visit? All of these actions are kind of experiments, quite big experiments, but we are not through with putting the whole commercial machine in place. I then look at what I look at in a quarter like this, where you look at Q2, you had a pretty simple situation. You knew more or less all prices would go up outside Specialties, and if every possible input cost almost would be either constrained or supply, and input costs would go up, and you go out, you raise the price, and you balance against volume.
To navigate this quarter, and I'm very happy with how we navigated it, we have had, for example, base oils, where we saw increase in some markets with 70% in a couple of weeks, and then we had downward pressure on solvents and regional differences. So here, it was much more navigational, keeping market position and allowing for certain volume growth, and that's how we navigated it. Then at the end, when we have done that, and I'm answering a question I know will come, gross margin, yes, went down a little bit, but I'm not worried about that because you didn't have everything up. You had a situation where new input costs were flowing into the inventories. We had pricing from Q2, and we had to play volumes and balance all of this. So, from my perspective, I'm happy with that we got the volume growth overall.
I am happy with that we have the leverage to the EBITDA from the top line. That is what we looked at. When you come into next year, and again, it is a large sales organization, 4,000 or 5,000 people, then over time, we are going to get into more and more global metrics for that. But I can already now say that in our BI and in Salesforce, we have kind of the cockpit agreed, and we are starting to track a number of KPIs, and they are the same across the company, the kind of base set.
Perfect. Thank you both for the detail. Just a quick follow-up to the first question. On a similar note, your special cost items increased again in Q3, and I assume some of that was related to cost restructuring and the headcount that you mentioned. Can you guide on those for Q4 and when we would start to see those come down?
Yes. I mean, this is obviously as well what affects, to some extent, obviously, our EPS, that we do have these special items in there. Yes, we do have transformation costs that are particularly related, obviously, to severance costs, where we are reducing our headcount, and that will actually be with us as long as we obviously continue to reduce the headcount. We will see that slightly inflated, but it will come down at that point in time when we will actually reach a more stable level. Having said that, we see a lot of opportunity to continue that cost-saving program.
On the people side, the introduction of more AI will actually help us to further enhance our cost base. This is a topic that we will continue to incur. Nevertheless, it will, over time, reduce, and then at some point, obviously, go even much smaller. But it will still be there for some time.
Understood. Thanks.
Thank you. Our next question will come from Harshita Butta with Goldman Sachs. Please unmute your line and go ahead. Harshita, you can now unmute your line and go ahead. Okay, we will move on temporarily. We will move on to Matthew Yates with Bank of America. Please unmute your line and go ahead.
Hey, good afternoon, everyone. Can you hear me okay?
Yeah.
Oh, perfect. Okay. Thank you. I have got a couple of questions, please. The first one is around the balance sheet. Your inventory was broadly flat quarter-over-quarter. I am conscious that, as you said in your earlier remarks, we have had a lot of price volatility, but now potentially we might be into a normalization or deflation phase. How do you feel you are sitting in terms of inventory volume and value when you measure that against what the order book looks like for the coming weeks and months? Is there any risk here that you are actually going into a seasonally smaller period with maybe some elevated stocks that could have to be marked down? The second question is around M&A.
Again, not to preempt any of the presentations tomorrow, but just looking at the last year- and- a- half or so, only EUR 250 million or so of capital has been deployed, which is a much smaller order of magnitude than was spoken about in the past. I am curious whether that reflects a change in strategy, in capital allocation, or is this more of a function of the opportunity set from the environment we have been in more recently? Thank you.
I will take the first question which is, on inventory and the broader sense of the working capital as a consequence as well. Yes, absolutely, the inventory is broadly flat, but there are a few effects underlying that you need to keep in mind. Even if you look at our overall sales prices, and obviously in conjunction with that as well, the replenishment costs actually moved in on a similar trajectory. What we have seen over the quarter is that while initially, there was a decrease in that, we have most recently seen again a slight acceleration in ASP, in the average sales price, which obviously was leading then to a relatively stable pricing effect.
As a consequence, you asked as well for the other element of the equation, from a volume point of view, we are actually staying relatively stable as well in that context on our overall inventory. That is the reason why it did not move down. If you look obviously going forward, we are reaching a quarter in which we are going to have less sales from a seasonality point of view. You can expect the respective impact actually onto our inventory, how we are managing that then there as well. Overall, really important to note that if you look at working capital, and in particular the working capital terms, that we are on the same level as last year. We are looking really at technical effect, as I have been describing that, on inventory and working capital in the third quarter.
Now, the headcount, Matthew, just to take that. You spotted that well. That number is nowhere near the total number. This is just basically central headquarter reductions. We have taken Our strategy, or tactics maybe, is to not give the whole number in every quarter. There are a couple of things happening. On the production side, we have a number of contractors that we have finished, also the white collars are contractors going out. They are not always showing up in the headcount. Some of them should be in our headcount, and at some stage we can talk about how those numbers have moved, but that is one cleaning up. But we are talking overall in the company numbers significantly higher than this 250. This is just overheads and headquarter. I guess in our annual accounts, you will see that clear, and we have more in the making.
Not at all like that. Why do we do that? Some of the countries where we do restructurings, for example, in Germany, we do quite substantial restructurings, and also other European countries. Fundamentally, if you do not talk so much about the number, you talk about competitiveness, all the rest, you draw a lot less attention by doing that. You can have a much more undisturbed discussion with works council and others, where the focus is not always on the headcount number and what the press writes and all the rest. That is the philosophy. But like I said, headquarter, central functions, bit of those divisions we took away, at least 250 out, and it is just a fraction of the total.
Yeah, thanks. Look forward to the presentation tomorrow.
Hello, am I audible?
Go to the next question. Yeah.
Hi, thank you for taking my question. My first question is on third quarter EBITDA, which fell sharply from 2Q number. Can you please help us understand if this decline, how much of this decline was due to the reversal of one-off inventory valuation gains in 2Q versus the underlying GP per unit moderation? Also, within EBITDA, the other EBITDA was much lower than normal levels. If you can discuss the driver and magnitude of any positive one-offs. My second question is on demand and gross profit per unit trends that you are seeing so far in 4Q versus 3Q. If you can provide any color on that. If the energy and transportation costs are becoming a bigger headwind in the current quarter versus 3Q. Thank you.
I'll take the gross profit, actually.
So, in terms of EBITDA, actually reduction, there's two basic factors. There's nothing actually extraordinary in terms of inventory gains that actually we have to report on. But I mean, the main element here is really that we see both a seasonality impact at this point in time and a reduction of the delta in the gross profit margin that we actually have seen, obviously, in the second quarter when the Middle East crisis hit us first, where we have had a benefit from lower inventories, that were in our stock for a period of, say, 60 days, which is our inventory turn. That allowed us to have a slightly higher gross profit margin. So obviously, that has normalized now, and we are in a situation in the second quarter where ASP slightly actually came down compared to that first quarter, and where second quarter, apologies.
And where then as a consequence as well, with the effect I've just been describing, EBITDA actually, as a consequence of gross profit margin reducing, has actually reduced as well. Against that, you see the continuous effect of the success of our cost-out program that is adding actually incremental, even in the third quarter compared to the second quarter. However, part of that is eaten up by the higher bonus provisions and the higher energy and transportation costs. So that's the key reasons why our EBITDA moved quarter on quarter.
Yeah. The gross margin, I commented on that. So inventory, the cost of the inventory and input costs are catching up with the pricing, and then we navigated a very mixed quarter where we have some prices up, some prices down, and we also have an [inaudible] mix effect depending on what countries close. I actually think the gross margin is pretty good during these circumstances because it was a lot of navigation. So how it all worked out with the up on the EBITDA at the bottom in spite of bonus provisions and the rest, we're quite happy with it actually.
Yeah, and just to build on that point, Jens has actually made that point a moment ago, but we see this gross profit reduction there as well as a bit temporary in nature, and it will actually come back to previous levels that we have enjoyed as well in the pre-Middle East conflict era.
Great. Thank you very much. As a reminder, if you would like to ask a question, you can use the raised hand feature at the bottom of your Zoom screen. Okay, we have Harshita Butta next. Please unmute your line and go ahead. Harshita, I can see you're on a mobile, so you can press star six to unmute. Thank you.
Hello. Am I audible?
Yes, you are indeed.
Am I audible now?
Yeah.
Sorry about that earlier. I just couldn't unmute my line. Thank you so much for taking our questions. Just one from my side, please. You've indicated that—
Now you broke off.
Harshita, it seems that you have muted your line, so if you could re-unmute yourself and try re-asking your question. Thank you.
Hello. Am I audible now?
You are indeed.
Okay, thank you. Just one question from my side, please. You've indicated that organic gross profit per working day grew in 3Q even after adjusting for the impact of the Middle East crisis. Could you please help us break down the underlying growth versus the Middle East effects in the quarter please? Is this a good proxy to take into 2027?
Harshita, I'm sorry, I can't hear your question.
What I have understood was actually that the question was around gross profit per working day actually improving. Did I hear you right? What the consequence for 2027 is. I mean, in principle, obviously, what we see at this point in time is that we still have quite a healthy gross profit increase in the third quarter compared to previous year. That's what we see not only on the total numbers, but as well if you actually look on the per working day numbers. Now, in terms of guidance actually for the next year, I apologize, but we are not yet giving the guidance for the next year at this point in time.
But we do see, let's put it actually at least for the fourth quarter, at this point in time, no indication that this positive trend is actually dramatically reducing in any form or shape. It is just actually continuing healthy here.
Harshita, even if we could give a guidance for next year, we wouldn't do it because with the volatility you have in the market today, you need to be on your toes and then navigate it as it happen. I mean, just in this quarter, we had oil price between 90 and 120. So many things are moving. Now we have weather-dependent energy situation on gas in Europe. It is just two weeks of cold weather away, and we have a different situation. There are so many volatile factors that in our type of short-cycled business, it is very, very hard to predict.
Some of our businesses like nutrition and others, they kind of, they weren't really impacted by this, nothing dramatic happens, but many of our businesses is very short-cycled and impacted of all these things going on, and we have to navigate it. Hence, even if we could, we wouldn't talk too much about next year. We prefer to do that early in the year.
Thank you so much for that color. I think I just broke off a little bit in the middle. I just wanted to understand the underlying growth trends versus the [inaudible] effect in the gross profit per working day impact in 3Q.
Okay. That is another part, obviously, which is related to how much of it is actually Middle East versus how much is actually underlying. We haven't actually said that at this point in time. Nevertheless, what we have been saying, I think very clearly, is that we do see the first positive results of all of our initiatives actually coming through, so that the overall better performance versus the last year is not entirely the Middle East effect. Certainly, a component of it, a larger component of it is as well because of the higher sales prices and higher margins that we've seen in the second quarter, and a part of that continuing actually into the third quarter. But we see a positive performance of the business underlying and first green shoots as well.
Great. Thank you very much.
Thank you so much, and apologies again for the disturbance in the line.
Perfect. Our next question will come from Anil Shenoy with Barclays. Please unmute your line and go ahead.
Yeah. Hi. Good afternoon, and thank you so much for taking my questions. Most of my questions have actually been answered. Just one remaining, please. Those are on your corporate costs or the EBITDA in the other segment. I mean, the EBITDA here was extremely high, or, I mean, the corporate costs were just about EUR 1 million in Q3 versus EUR 17 million last year and EUR 30 million in Q2. I was wondering what drove this unusually low corporate cost, and what should we assume for these costs in Q4, and then going forward in FY 2027 as well? Thank you.
Okay. We are looking here at a bit of a technical effect in the corporate costs, where we have actually had intercompany charges where we were charging out particular some of the IT costs for costs of new systems actually going live, that we had a catch-up effect in the third quarter on that. That's a very, very, very low double-digit figure that has been charged out. As a consequence, the central costs obviously have been shown a bit less, and actually, the cash-generating units, so our operational businesses in the Essentials and Specialties space, have actually received these costs as charges. They are slightly higher overall because of that catch-up effect, and that has a decreasing effect onto the EBITDA margin in the segment. That's the explanation for that. It's charges within the company.
Sure. Got it. On the group level, just to confirm, there's no impact on the group level, and it's only cross-divisional?
That's absolutely correct.
Yeah. Perfect. Thank you so much.
Well, this concludes the Q&A session. I will now hand back to management for any closing remarks.
Yeah. Thank you, Stefan. This brings us to the end of the conference call. In case of further questions, as always, please do not hesitate to reach out to our Investor Relations team. We look forward to welcoming many of you to our Capital Markets Day here in Essen tomorrow. The presentations and the press release will be published on our Investor Relations website shortly before the event. A recording will be available on our website as well afterwards. Please mark March 10th, 2027 in your calendars, when we will publish our full year 2026 results. Ladies and gentlemen, thank you very much for joining us today. Have a good day, and bye-bye.
This concludes today's call. Thank you, everyone, for joining. You may now disconnect.