November 30, 2020

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Brenntag Group announces scope of global transformation program

Brenntag Group announces scope of global transformation program
Photo courtesy of Brenntag AG

Global chemical distributor Brenntag AG (ISIN DE000A1DAHH0) announced the scope of Project Brenntag, the company’s comprehensive transformation program. The program is designed to further expand Brenntag’s global market leading position through an increased focus, reduced complexity, and even stronger partnerships with customers and suppliers. 

Starting in January 2021, the company will be steered in two global divisions with a strong focus on changing customer and supplier needs: Brenntag Essentials and Brenntag Specialties. As part of the transformation, Brenntag will invest in optimising its global site network and improve its utilisation.

“With our transformation program Project Brenntag, we take decisive action to create the strong basis for sustainable organic earnings growth in the coming years. The introduction of our new operating model was a first important milestone to cope with future requirements and stay at the top of our industry,” said Christian Kohlpaintner, chief executive officer, Brenntag Group.

“To harvest our full potential, it is crucial to become leaner and more efficient. The implementation of the various measures of Project Brenntag will also include an adjustment of our global workforce. This step will be anything but easy for us, but it is necessary to ensure Brenntag’s success in the long-term. We intend to perform any planned reductions in a socially responsible manner and strive to avoid compulsory redundancies.”

Significant operating EBITDA uplift

Brenntag expects Project Brenntag to deliver a sustainable annual contribution in additional operating EBITDA of EUR220 million (USD260 million) in total, which will increase year by year to the full annual potential already by beginning of 2023. The total net cash outflow to incur in course of the implementation of Project Brenntag is expected to amount to around EUR370 million (USD313 million). Project Brenntag is expected to generate significant efficiency gains and contribute to top-line growth as well.

Brenntag expects the implementation of the various measures over the next two years to lead to a reduction of approximately 1,300 jobs in total out of its workforce of about 17,500 employees worldwide, of which a reduction of less than 200 jobs is expected to impact Germany. Brenntag plans to use natural fluctuation, mutually agreed separation, and regular and early retirement schemes to perform the adjustments in a socially responsible manner and strives to avoid compulsory redundancies. The measures will be further elaborated over the coming months in line with local rules and labor regulations. 

Consolidated global network of sites with increased proximity to customers

To become leaner and more efficient, Brenntag will invest significantly in its site network to support customers faster, broader, and better. 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 optimization envisions closing sites to consolidate the site network in geographies and improve the utilization of existing sites. Brenntag plans to close about 100 sites across all regions, half of which are Third-Party Logistics Sites. At the same time, the Group will invest into existing and new sites, create regional hubs, and close white spots in the network.

New leadership culture with clearly defined accountabilities

In line with the operating model, Project Brenntag also entails new roles and clearly defined accountabilities and responsibilities. It includes a new leadership structure, starting with the composition of the Management Board and the top leadership team. The competences and skills needed for the transformation have been defined, and Brenntag will invest significantly in training to enable its employees to bring in their strengths and expertise in the best possible way.

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