Brenntag (ETR:BNR) said its first-quarter 2026 results reflected a slow start to the year followed by a sharp improvement in March as volatility tied to the crisis in the Middle East lifted pricing and prompted some customers to rebuild inventories.
On the company’s earnings call, Chief Operating Officer Jens Birgersson said he was “satisfied” with the quarter despite weak activity in January and February, when volumes were down about 5%. He said the company had expected difficult comparisons after a strong first quarter in the prior year, but market conditions changed quickly after the outbreak of the Iran crisis at the end of February.
Birgersson said Brenntag moved rapidly to secure customer supply, raise prices, pass through surcharges and manage shipments across regions. He credited the company’s flatter organizational structure, in which business units and regions report directly to him, with helping the company respond quickly.
“Agility is key in today’s world and here we were extremely quick to get going,” Birgersson said. He added that the company’s size, supplier relationships and industry connections helped it manage volatility, saying Brenntag has shown that it can “thrive in times of volatility.”
Margins Improve Despite Lower Sales
Chief Financial Officer Thomas Reisten said operating gross profit amounted to 950 million euros in the first quarter, down 1.3% year over year. Gross margin increased by 0.9 percentage points to 25.9%, which he attributed to pricing discipline and supply reliability.
Operating EBITDA was 306 million euros, down 8.3% from the prior year, while operating EBITA declined 12.6% to 217 million euros. Profit after tax totaled 98 million euros. Free cash flow was 91 million euros, affected by higher working capital requirements tied to rising oil prices and increased inventory needs.
Reisten said the earnings decline was primarily volume-driven, with positive pricing trends in March helping but not fully offsetting weaker demand earlier in the quarter.
“The first quarter highlights Brenntag’s margin resilience and the commercial agility, while also underlining the continued need for strict cost discipline in the current environment,” Reisten said.
Essentials Sees Earlier Recovery; Specialties Remains Mixed
In Brenntag Essentials, operating gross profit was 666 million euros, down 1.1% year over year. Reisten said demand remained subdued across most regions, particularly North America and Asia-Pacific early in the quarter, though EMEA showed modest growth and Latin America benefited from underlying momentum. Essentials’ gross margin rose 1.2 percentage points to 27%.
In Brenntag Specialties, operating gross profit was 284 million euros, down 1.9%. Reisten said weaker demand in Life Science was partly offset by positive momentum in Material Science. Gross margin in Specialties expanded 0.4 percentage points to 23.7%.
Birgersson said the immediate impact of the Middle East disruption was most visible in Essentials, particularly solvents. Specialties, by contrast, has smaller volumes and more contract-based business, meaning the impact is expected to be more gradual.
“On the Specialties side you see that their contracts are in place, smaller volumes, not a quick impact,” Birgersson said.
Middle East Crisis Drives Supply and Pricing Actions
Management spent a significant portion of the call discussing the impact of the Middle East crisis on chemical markets. Birgersson said Brenntag has only about 150 employees in the Middle East, so the direct sales and gross profit impact is limited. However, he emphasized that the region is critical for global chemical supply chains.
Birgersson cited several products where a large share of global trade moves through the Strait of Hormuz, including monoethylene glycol, sulfur, methanol, urea, ammonia, phosphate rock and various phosphates.
The regional impact has varied. Birgersson said the United States has seen higher gas prices and chemical price increases but no market slowdown in Brenntag’s segments. Asia-Pacific experienced a higher impact, with some Chinese suppliers doubling or tripling prices or declining to supply. Latin America saw lower overall effects and benefited from strong buying behavior and reduced Chinese imports in some areas. EMEA experienced medium to high energy price impacts, some supply constraints and rapid price increases in solvents.
During the question-and-answer session, Birgersson said the initial shock from shortages appeared to have passed. “We have stock. We have built a suitable amount of stock in our business, and we feel confident that we can deliver,” he said.
Cost-Cutting Program Remains a Priority
Brenntag said its cost-out program is progressing. Reisten said the company delivered 27 million euros in cost savings during the first quarter. After resetting its baseline to fiscal 2025, Brenntag is targeting additional savings of 200 million to 250 million euros by 2027.
Birgersson said the company is tracking toward about 150 million euros in savings this year and stressed that Brenntag is relying primarily on its own organization rather than outside consultants.
“We don’t use consultants. We do it ourselves,” Birgersson said. He described cost reduction, productivity improvement and simplification as core competencies the company needs to develop.
Reisten said reported operating expenses decreased by about 20 million euros year over year, helped by 34 million euros of foreign-exchange tailwinds, though partially offset by M&A effects, bonus accruals and other costs. He said higher transportation, logistics and energy costs linked to the Middle East disruptions offset part of the cost-out progress, although Brenntag has been able to pass through higher energy costs through fuel surcharges and pricing.
Guidance Confirmed; Demand Outlook Remains Uncertain
Brenntag confirmed its fiscal 2026 guidance for operating EBITDA of 1.15 billion to 1.35 billion euros. Reisten said the company’s trajectory for the rest of the year will depend on the impact of the Middle East crisis on demand across key global markets.
Even if the conflict de-escalates, Reisten said normalizing supply chains is expected to take more than six months. He also warned that high inflation could weigh on demand over time.
Birgersson said management is not worried about the second quarter given current pricing and supply dynamics, but he was cautious about the second half of the year because the company has limited visibility into end-market demand. He said Brenntag has taken a careful approach in its full-year forecast to account for potential demand destruction.
The company also said it will hold a Capital Markets Day on Nov. 12, when it plans to present more detail on its strategic review and operating priorities.
Separately, Birgersson said Brenntag had recorded two fatalities in the business through the end of April, both occurring at customer sites. He said the incidents were being reviewed closely and underscored the inherent safety risks in handling and transporting chemicals.
About Brenntag (ETR:BNR)
Brenntag SE purchases and supplies various industrial and specialty chemicals, and ingredients in Germany, Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates in two segments, Brenntag Essentials and Brenntag Specialties. It provides just-in-time delivery, product mixing, blending, repackaging, inventory management, and drum return handling. The company serves customers in various end-market industries, including nutrition, pharma, personal care, water treatment, and lubricants; and home, industrial, and institutional markets, as well as coatings and constructions, polymers, and rubber industries.
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