IMCD Earnings Growth Slows on Restrained Economic Expansion

IMCD Group NV (IMCD) fell below its initial public offering price after the Dutch chemical distributor predicted that earnings will slow in the second half on “low to modest” growth in its key markets.

Operating profit will increase by at least 6 percent this year, after earnings by that measure, which excludes interest, taxes, amortization and one-time items, rose 13 percent in the first half to 56 million euros ($75 million), the Rotterdam-based company said today in a statement.

The distributor of about 24,000 products, from toothpaste and processed foods to specialty chemicals and plastics, listed shares in Amsterdam in June to reduce debt and pave the way for expansion. Bain Capital retains a stake of about 39 percent, according to data compiled by Bloomberg.

Europe has done well, while Asia disappoints a bit, mostly as this is where organic growth should come from in the longer term,” Joost van Beek, an analyst at Theodoor Gilissen Bankiers in Amsterdam, said by phone.

Operating profit in Europe, the biggest contributor to earnings and revenue, increased by 8.2 percent in the first half, while the measure declined 2.3 percent in the Asia-Pacific region, dragged down by currency fluctuations and weakness in Australia, IMCD said.

“Macroeconomic outlook for the most important regions IMCD is working in shows low to modest GDP growth,” the company said in the statement.

Share Performance

The stock fell as much as 4.5 percent to 20.69 euros, below the IPO price of 21 euros, and traded at 21.03 euros at 10:11 a.m. in Amsterdam.

Lower interest costs resulting from reduced debt will “be the biggest profit-growth driver in the second half of the year and next year,” Van Beek said.

IMCD reduced debt as of July 8 by 556.3 million euros, to 291.2 million euros, it said today. In the past three years, the company acquired 18 businesses in 16 countries.

“The group is continuously working on expanding its product portfolio and the acceleration of these initiatives is important to realize growth,” the company said. “Projects are going on to integrate and optimize the businesses acquired in 2013.”

IMCD had a net loss in the first half of 557,000 euros compared with profit of 2.3 million euros a year earlier. That came as revenue rose 14 percent to 702.4 million euros. The gross profit margin fell to 21 percent from 21.4 percent “due to product mix changes” and declines in non-euro currencies, the company said.

“We saw an increase in revenues across all our markets and are positive about the current performance and the outlook,” Chief Executive Officer Piet van der Slikke said in the statement.

To contact the reporter on this story: Elco van Groningen in Amsterdam at vangroningen@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net David Risser, Robert Valpuesta

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