By Matteo Allievi and Jagoda Darlak
(Reuters) -German chemicals distributor Brenntag on Wednesday beat first-quarter core profit expectations, helped mainly by growth in its Essentials division, which makes chemicals for industries ranging from food to oil and gas.
The company reported operating earnings before interest, taxation, depreciation and amortisation (EBITDA) of 420.4 million euros ($462.8 million) for the quarter, above analysts' estimates of 406.6 million euros in a poll by Vara Research.
Energy prices are decreasing as inflation has passed its peak in Germany, and global supply chain problems have eased as economies, including China, loosen COVID-19 curbs, with chemical distributors benefiting from a pick up in volumes of raw materials.
However, core earnings were 9% below the same period from a year ago amid a still challenging macro-economic environment.
"Inflation-driven increases in costs and falling demand also made it difficult to repeat the strong prior-year results," the company said in a statement.
Europe, the Middle East and Africa (EMEA) and the Americas were the strongest markets, whereas the performance in the Asia Pacific (APAC) segment was weaker, as it was not yet seeing the impact from a recovery in China, the Essen-based company said.
Brenntag confirmed its previous guidance for 2023, still seeing an operating EBITDA range between 1.6 billion euros and 1.8 billion euros.
"We observed a gradual monthly improvement in demand, with early indications for a positive Q2 volume development continuing," Chief Executive Officer Christian Kohlpaintner said.
Analysts at Baader said the guidance range for 2023 might be conservative, expecting Brenntag to achieve at least the upper end of its range.
Only Brenntag's Essentials division managed to grow its profits in the first quarter, while the Specialties business, which provides services to industries such as nutrition, pharmaceuticals and household products, was affected by high costs and falling demand.
The disparity in the performance of the two divisions highlights the reason why investors have been calling on Brenntag to spin off the Specialties unit, arguing it would boost the share price.
Shares were down 1% at 0919 GMT.