Univar (UNVR) Tops Q2 EPS by 1c

Univar (NYSE: UNVR) reported Q2 EPS of $0.42, $0.01 better than the analyst estimate of $0.41. Revenue for the quarter came in at $2.58 billion versus the consensus estimate of $2.82 billion.

Second Quarter 2019 Highlights

• Univar Solutions reported net income of $16.3 million, or $0.10 per share, compared to net income of $56.1 million, or $0.40 per share, in the prior year second quarter. The current quarter includes $49.1 million of integration and transaction related costs before tax, and higher shares outstanding associated with the Company\'s acquisition of Nexeo Solutions, Inc. (\"Nexeo\") in the first quarter of 2019.
• Adjusted earnings per share of $0.42 compared to $0.47 in the prior year second quarter, in line with expectations.
• Adjusted EBITDA grew 16.2 percent to $201.1 million, and Adjusted EBITDA margin expanded 50 basis points to 7.8 percent from the prior year.
• Leverage ratio (1) of 4.1x essentially equal to the end of the second quarter last year.
• Raised annual net synergy expectations from the Nexeo acquisition value capture program from $100 million to $120 million, with $20 million expected to be realized in 2019, up from original estimate of $10 million.
• The Company expects market demand for chemicals and ingredients in the second half of 2019 to be lower than the comparable period in 2018, and now expects Adjusted EBITDA for the full year between $725 million and $740 million, compared to its previous estimate of $740 million to $760 million.

Outlook

The Company's integration of Nexeo's chemical distribution customers, suppliers and support functions is progressing swiftly and successfully. Cost saving synergies are now expected to be greater than originally estimated. As a result, the Company is raising its forecast for annual, recurring net synergies from $100 million to $120 million before tax. The Company expects to realize $20 million in net synergies in 2019, doubling its initial estimate of $10 million.

The Company issued financial guidance at the beginning of the year based on the assumption that industrial production growth would be flat, slower than its historical projection of one to two percent growth. Market demand for chemicals and ingredients, however, has progressively declined in the first half of the year. The Company now expects chemical and ingredient demand from industrial end markets for the full year to be lower than the prior year.

Taking into account lower than expected market demand for chemicals and ingredients, and outlook commentary from many supplier partners, along with higher forecasted net cost synergies from the Nexeo acquisition, the Company projects full year Adjusted EBITDA to be within a range of $725 million to $740 million, compared to its prior forecast of $740 million to $760 million which assumed flat year-over-year demand. Further, the Company expects free cash flow for the year to be in a range of $275 million to $325 million, including the payment of the $62.5 million legal settlement reported in the first quarter, and before one-time integration and transaction costs.

For the third quarter of 2019, the Company expects Adjusted EBITDA to be between $180 million and $190 million, up from $157.0 million earned in the third quarter of 2018.

For earnings history and earnings-related data on Univar (UNVR) click here.

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