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Univar (UNVR) Misses Q4 EPS by 2c, Revenues Miss

February 25, 2020 6:33 AM EST

Univar (NYSE: UNVR) reported Q4 EPS of $0.29, $0.02 worse than the analyst estimate of $0.31. Revenue for the quarter came in at $2.16 billion versus the consensus estimate of $2.24 billion.

Fourth Quarter 2019 Highlights

  • Net income (loss) of $(55.1) million compared to $1.2 million in the prior year fourth quarter; Adjusted net income(1) in 2019 of $50.5 million compared to $47.5 million in 2018.
  • Earnings per diluted share of $(0.33), compared to $0.01 per diluted share, in the prior year fourth quarter. The current quarter increase from the addition of Nexeo Solutions, Inc.'s ("Nexeo") earnings, better operating performance, and divestiture gain was more than offset by the increase from the impact of taxes, lower demand in global industrial markets, loss on extinguishment of debt, and pension mark to market.
  • Adjusted earnings per diluted share(1) of $0.29 in the quarter decreased from $0.33 in the prior year fourth quarter due to increase in earnings from Nexeo and better operating performance, more than offset by lower global demand, higher share count and higher D&A.
  • Growth in Adjusted EBITDA(1) of 10.3 percent to $158.8 million and Adjusted EBITDA margin(1) expanded 10 basis points to 7.4 percent from the prior year; Adjusted EBITDA for the current quarter benefited from the Nexeo acquisition, including net cost synergies.
  • Net cash provided by operating activities increased to $329.7 million from $292.5 million, in the fourth quarter last year, driven by lower net working capital as well as improved net working capital efficiency. The leverage ratio decreased from 3.9x at September 30, 2019 to 3.3x at December 31, 2019.

"I am very pleased at how we have executed successfully against our strategic priorities of integration and synergy capture from the Nexeo acquisition, portfolio management and strengthening our balance sheet. During the quarter and the full year 2019, we earned solid margins and had strong cash flow generation, despite weakness in some of our end markets and lower chemical prices. Our Nexeo integration team successfully achieved important ERP migration milestones and realigned sales territories to increase our market coverage and increase our salesforce effectiveness. We also completed non-core divestitures, delivering on our commitments to focus on our chemical and ingredient businesses and reduce leverage to our lowest level as a public company, standing at 3.3x at December 31, 2019." said David Jukes, president and chief executive officer. "We are continuing to position Univar Solutions to deliver long-term profitable growth and shareholder value."

Outlook

The following is an overview of management's expectations for Univar Solutions\' financial performance for the first quarter and full year 2020.

For the first quarter and full year 2020, Univar Solutions expects to generate Adjusted EBITDA in the range of $150 million to $160 million and $700 million to $740 million, respectively. Univar Solutions expects continued weak end markets and a challenging competitive environment in the first half of the year, with the first quarter of 2020 to be the weakest quarter of the year. The Company expects to generate $120 million to $170 million in Free Cash Flow in full year 2020, due largely to an expected increase in working capital investment driven by growth in sales. This Free Cash Flow guidance is before acquisition, integration and restructuring charges, as well as other unusual significant events.

In developing this guidance, Univar Solutions made the following assumptions for the full year 2020:

Macroeconomic environment:

  • Flat industrial production, weighted to the back-half of the year.
  • Energy headwinds in the U.S.
  • Pricing pressures in bulk commodity
  • Excludes any continuing impact from the Coronavirus outbreak.

Operating improvements:

  • Continued improvement in sales force efficiency driven by the sales force territory realignment.
  • Growth from new supplier authorizations.
  • Nexeo net cost synergies of approximately $40 million.

Other:

  • EMEA finished pharmaceutical market pressures of $15 million in EBITDA.
  • Interest expense, net of $115 to $125 million, lower than 2019 interest expense, net of $140 million.
  • Income tax rate for Adjusted EPS of 28-30%.
  • Diluted weighted average common shares outstanding of 175 million, higher than 2019 diluted weighted average common shares outstanding of 164.1 million largely due to the shares issued in the Nexeo transaction being reflected for the full year of 2020.
  • Free cash flow assumes capital expenditures of $120 million to $130 million which includes growth initiatives and investments in our digital infrastructure.

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



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