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Investing.com -- S&P Global Ratings revised its outlook on Brenntag SE to negative from stable on Monday, while affirming the chemical distributor’s ’BBB+’ rating.
The rating agency cited weakening credit metrics that are expected to remain under pressure longer than previously anticipated, following Brenntag’s downward revision of its full-year 2025 earnings guidance and continued softness in core industrial markets.
Preliminary results for the first half of 2025 showed continued earnings pressure, with operating EBITA down 8.2% year-on-year to €510.7 million. Second quarter EBITA declined 17%, reflecting persistent foreign exchange headwinds, subdued demand, and pricing pressure.
S&P forecasts Brenntag’s adjusted EBITDA to decline for a second consecutive year to €1.29 billion in 2025 from €1.38 billion in 2024, with the EBITDA margin expected to reach a low point of 8.0%, well below the historical average of about 9.0%. A moderate recovery is anticipated to €1.50 billion in 2026 and €1.58 billion in 2027.
The rating agency expects adjusted debt to EBITDA to increase to about 2.6x in 2025 from 2.2x in 2024, with only gradual improvement to approximately 2.3x in 2026 and 2.2x in 2027. Funds from operations (FFO) to debt is forecast to decline to about 28% in 2025 from 33.7% in 2024, with recovery to about 32% in 2026 and 33% in 2027.
Free operating cash flow is expected to remain subdued at €504 million in 2025, after declining to €564 million in 2024 from €1.34 billion in 2023. Despite this reduction, cash flow remains solid in absolute terms due to the company’s relatively low capital expenditure requirements as an asset-light chemicals distributor.
S&P noted that Brenntag is currently in a leadership transition period, with a new chief financial officer appointed in April 2025 and a new CEO set to take office in September 2025.
The rating agency indicated it could lower Brenntag’s rating within the next 18-24 months if FFO to debt remains at or below the lower end of the 30%-45% range with no clear path to recovery through 2027. Conversely, the outlook could be revised to stable if Brenntag demonstrates a recovery in operating performance with FFO-to-debt sustainably improving within that range.
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