Brenntag 2012 Profit Goal Lags Behind Expectations, Stock Falls

Brenntag AG, the chemical distributor aspiring to join Germany’s benchmark DAX index, predicted profit growth for this year that fell short of analysts estimates, prompting the biggest stock drop in a month.

Operating earnings before interest, tax, depreciation and amortization, which also excludes reorganization and financing costs, will probably reach 705 million euros (873 million) to 735 million euros in 2012, the Muelheim an der Ruhr, Germany-based company said today in a statement. Analyst Heiko Feber of Bankhaus Lampe KG had expected 737 million euros.

Chief Executive Officer Steven Holland said today the company would have to be vigilant in case the global economy worsens and predicted regional differences in growth rates because of the “difficult” economic conditions. Brenntag is counting on the seven acquisitions it made in the past 12 months will help boost growth.

“The big positive outlook for 2012 that most people expected was not given,” said Feber, who rates the stock buy.

The stock dropped as much as 3.89 euros, or 4.2 percent, to 88.61 euros in Frankfurt, and traded at 89.95 euros as of 10:38 a.m. The stock has gained 25 percent this year, valuing Brenntag at about 4.63 billion euros.

Second-quarter operating profit gained 10 percent to 184.4 million euros, beating the average 180.5 million-euro analyst estimate in a Bloomberg survey. Sales rose 15 percent to 2.49 billion euros, exceeding a 2.41 billion-euro estimate.

The chemical distributor bought a majority stake in Zhong Yung Chemical Ltd. in Hong Kong last year and last month purchased ISM/Salkat Group, which operates in Australia and New Zealand. The company has also bought assets in the U.S., U.K., Italy, Mexico and South Africa in the past 12 months.

Brenntag’s full-year forecast assumes no significant fluctuations in the average U.S. dollar exchange rate and a “stable” economic situation, the company said.

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