Brenntag (XTER:BNR, Financial) is based in Germany and one of the top global chemical distributors. The company is responsible for connecting chemical manufacturers to manufacturer end customers, purchasing larger quantities of chemicals, and re-packing those chemicals for customers. In our view, Brenntag’s position in the specialty chemical distribution market affords the company an attractive opportunity for high growth, serving around 100,000 customers with products from thousands of suppliers. Further, the global chemical distribution market grows faster than the global chemical manufacturing market at a 3-5% compound annual growth rate versus 2-4%. As such, we believe that market leaders, like Brenntag, can grow even faster through consolidation by manufacturers and higher gross margins, making its growth far less cyclical than the underlying chemical markets. We appreciate management’s multi-year plan to reorganize the business structure to align with the distinct needs of specialty and commodity markets, sharpen incentives, increase focus on value-over-volume, and trim Brenntag’s cost structure, which should help the company close its performance deficit while retaining upside optionality, in our view.
From David Herro (Trades, Portfolio)'s Oakmark International Fund first-quarter 2023 commentary.
