IMCD reports 51% EBITDA growth in first nine months of 2021

IMCD, a leading distributor of speciality chemicals and ingredients, has announced its first nine months 2021 results.

Piet van der Slikke, CEO says: “We have delivered strong results in the first nine months of this year. Despite constraints in the supply chains, our committed team was able to benefit from strong demand and further expanded and leveraged our commercial relationships. Operating EBITA was up with 51% (fx. adjusted +54%) or EUR 96.5 million and we realised a healthy cash flow of 204.5 EUR million (+21%) in the first nine months of this year. All regions delivered double digit operating EBITA growth numbers. We further successfully executed our growth strategy by two acquisitions in China and Mexico in the third quarter of this year. Although we foresee continuing supply chain challenges in the remainder of the year, we are confident that our well-established commercial, digital and logistic infrastructure, enables us to realise our sustainable growth ambitions.”

IMCD personal care
IMCD is a leading distributor of speciality chemicals and ingredients

Key Figures

EUR MILLION                                                                                                                                                                                              JAN. 1 – SEPT. 30, 2021                              JAN. 1 SEPT. 30, 2020                          CHANGE                  CHANGE           FX ADJ. CHANGE

  Revenue  2,537.1  2,082.3  454.8  22%  24%
Gross profit620.8485.7135.128%30%
Gross profit in % of revenue24.5%23.3%1.2%  
Operating EBITA1286.4189.996.551%54%
Operating EBITA in % of revenue11.3%9.1%2.2%  
Conversion margin246.1%39.1%7.0%  
Net result before amortisation/non-recurring items202.0130.871.254%58%
Free cash flow3204.5168.336.221% 
Cash conversion margin470.8%87.5%(16.7%)  
Earnings per share (weighted)2.661.740.9253%56%
Cash earnings per share (weighted)53.542.461.0844%47%
  Number of full time employees end of period  3,579  3,095  484  16% 

1 Result from operating activities before amortisation of intangibles and non-recurring items

2 Operating EBITA in percentage of gross profit

3 Operating EBITDA excluding non-cash share-based payment expenses, less lease payments, plus/less changes in working capital, less capital expenditures

4 Free cash flow in percentage of adjusted operating EBITDA (operating EBITDA plus non-cash share-based payment costs minus lease payments)

5 Result for the year before amortisation (net of tax) divided by the weighted average number of outstanding shares

Revenue

Compared with the first nine months of 2020, revenue increased by 22% from EUR 2,082.3 million to EUR 2,537.1 million (+24% on a constant currency basis). This 24% increase in revenue is the result of organic growth (+14%) and the impact of the first time inclusion of companies acquired in 2020 and 2021 (+10%).

Gross profit

Gross profit, defined as revenue less cost of materials and inbound logistics, increased by 28% from EUR 485.7 million in the first nine months of 2020 to EUR 620.8 million in 2021. On a constant currency basis, the increase in gross profit is 30%, consisting of organic growth of 19% and growth as a result of the first time inclusion of acquisitions of 11%.

Gross profit in % of revenue increased by 1.2%-point from 23.3% in the first nine months of 2020 to 24.5% in 2021. The gross profit margin increase is the result of changes in local market circumstances, gross margin improvement initiatives, the impact of newly acquired businesses, currency exchange rate developments and fluctuations in the product mix.

Operating EBITA

Operating EBITA increased by 51% from EUR 189.9 million in the first nine months of 2020 to EUR 286.4 million in the same period of 2021. The growth in operating EBITA was a combination of organic growth and the first time inclusion of companies acquired in 2020 and 2021.

The operating EBITA in % of revenue increased by 2.2%-point from 9.1% in the first nine months of 2020 to 11.3% in 2021.

The conversion margin, defined as operating EBITA as a percentage of gross profit, increased by 7.0%-point from 39.1% in the first nine months of 2020 to 46.1% in 2021. The increase in conversion margin is the result of substantial organic EBITA growth, whereby organic gross profit growth more than compensated own cost growth, combined with a positive impact of acquisitions made.

Cash flow and capital expenditure

Free cash flow increased by EUR 36.2 million, from EUR 168.3 million in the first nine months of 2020 to EUR 204.5 million in 2021.

The cash conversion margin, defined as free cash flow as a percentage of adjusted operating EBITDA (Operating EBITDA adjusted for non-cash share-based payments and lease premiums), was 70.8% compared with 87.5% in the first nine months of 2020. The increase of the free cash flow in 2021 is the result of higher operating EBITDA, higher investments in net working capital as a result of substantial organic revenue growth, and less capital expenditures.

The investment in net working capital (sum of inventories, trade and other receivables minus trade and other payables) in the first nine months of 2021 was EUR 81.6 million compared with EUR 18.7 million in the same period of 2020. Working capital investments were primarily driven by new and substantially increased business activities in 2021. At the end of September 2021, net working capital in days of revenue was 58 days (September 2020: 55 days).

Capital expenditure was EUR 2.9 million in 2021 compared with EUR 5.4 million in the first nine months of 2020 and mainly relates to investments in the ICT infrastructure, office improvements and technical and office equipment.

Net debt

As at 30 September 2021, net debt was EUR 789.2 million compared with EUR 739.3 million as of 31 December 2020.

The leverage ratio (net debt/operating EBITDA ratio including full year impact of acquisitions) as at the end of September 2021, was 2.0 times EBITDA (31 December 2020: 2.3). Calculated on the basis of the definitions used in the IMCD loan documentation, the leverage ratio as at the end of September 2021 was 1.5 times EBITDA (31 December 2020: 1.6) which is well below the maximum of 3.5 as allowed under the loan documentation.

The development of the leverage ratio is, among other things, influenced by payments for acquisitions and a dividend distribution of EUR 58.1 million in June 2021.

Developments by operating segment

The reporting segments are defined as follows:

•          EMEA: all operating companies in Europe, Turkey, Israel, United Arab Emirates, Saudi Arabia and Africa

•          Americas: all operating companies in the United States of America, Canada, Brazil, Puerto Rico, Chile, Argentina, Uruguay, Colombia, Mexico, Peru, Costa Rica, Dominican Republic

•          Asia-Pacific: all operating companies in Australia, New Zealand, India, Bangladesh, China, Malaysia, Indonesia, Philippines, Thailand, Singapore, Vietnam, Japan and South Korea

•          Holding companies: all non-operating companies, including the head office in Rotterdam and the regional offices in Singapore and New Jersey, US

The developments in the first nine months of 2021 by operating segments are as follows.

EMEA

EUR MILLION                                                                                                                                                                                JAN. 1 – SEPT. 30, 2021                              JAN. 1 SEPT. 30, 2020                           CHANGE                       CHANGE               FX ADJ. CHANGE

  Revenue  1,194.2  1,003.6  190.6  19%  20%
Gross profit307.8255.951.920%21%
Gross profit in % of revenue25.8%25.5%0.3%  
Operating EBITA134.999.635.335%37%
Operating EBITA in % of revenue11.3%9.9%1.4%  
Conversion margin43.8%38.9%4.9%  

In the first nine months of 2021, revenue was EUR 1,194.2 million, compared with EUR 1,003.6 million in the the same period of 2020 (+19%). On a constant currency basis revenue increased by 20%. Gross profit increased by 20% from EUR 255.9 million in the first nine months of 2020 to EUR 307.8 million in 2021. On a constant currency basis, gross profit growth was 21%. Gross profit margin increased by 0.3%-point to 25.8%.

Operating EBITA increased by 35%, from EUR 99.6 million in the first nine months of 2020, to EUR 134.9 million in 2021. Compared with the same period in 2020, operating EBITA in % of revenue increased by 1.4%-point to 11.3% in the first nine months of 2021.

The first nine months of 2021 figures include the impact of the acquisition of Oy Kokko-Fiber AB, completed in September 2020 and Ejder Kimya Ilaç Danışmanlık Sanayi, Peak International Products B.V. and Siyeza Fine Chem Propriety Limited completed in January 2021.

Americas

EUR MILLION                                                                                                                                                                                JAN. 1 – SEPT. 30, 2021                              JAN. 1 SEPT. 30, 2020                           CHANGE                       CHANGE               FX ADJ. CHANGE

  Revenue  821.9  726.4  95.5  13%  19%
Gross profit184.4158.825.616%22%
Gross profit in % of revenue22.4%21.9%0.5%  
Operating EBITA84.670.014.621%27%
Operating EBITA in % of revenue10.3%9.6%0.7%  
Conversion margin45.9%44.1%1.8%  

In the first nine months of 2021, revenue was EUR 821.9 million, an increase of 13% compared with the same period of 2020 (+19% on a constant currency basis). Gross profit increased by 16% from EUR 158.8 million in the first nine months of 2020 to EUR 184.4 million in 2021 (+22% on a constant currency basis). Gross profit in percentage of revenue increased by 0.5%-point to 22.4%.

Operating EBITA increased by 21% from EUR 70.0 million in the first nine months of 2020 to EUR 84.6 million in 2021 (+27% on a constant currency basis).

On 19 August 2021, IMCD acquired 100% of the shares in Materias Químicas de México S.A. de C.V. and Pluralmex S.A de C.V. (together: “Maquimex”), based in México City. Maquimex is a speciality chemicals distributor providing commercial and technical expertise in the preservatives, HI&I, energy, water treatment and other industrial markets. Maquimex has 44 employees and generated a revenue of approximately USD 29 million in 2020. The first nine months 2021 figures include the impact of the acquisition of VitaQualy Comércio de Ingredientes LTDA, completed in August 2020, Millikan S.A. de C.V. and Banner Quimica S.A. de C.V. in December 2020, the divestment of the Nutri Granulations business in April 2021 and the acquisition of Siliconas y Químicos and Andes Chemical Corp

Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za