Univar Reports 2018 Third Quarter Financial Results

DOWNERS GROVE, Ill., Nov. 6, 2018 /PRNewswire/ -- Univar Inc. (NYSE: UNVR) ("Univar"), a global chemical and ingredients distributor and provider of value-added services, announced today its financial results for the third quarter ended September 30, 2018.

"Our global execution continues to improve and our customers and supplier partners are recognizing the value that Univar brings," said David Jukes, president and chief executive officer. "Whilst we have much work ahead of us, our USA transformation is solid and sustained, and we are encouraged by our progress to date. Our recently announced acquisition of Nexeo further enhances our capabilities and accelerates our ability to create significant value for our customers, supplier partners, employees and shareholders."

"Since we began to execute our strategic plan, we have delivered our 8th consecutive quarter of EBITDA growth. We are highly confident we have the right global growth programs in place to deliver superior value for our shareholders, despite some temporary challenges in our Canadian business."

"Our cost productivity continued to increase, and we used our strong operating cash flow to reduce debt and further strengthen our balance sheet," added Carl Lukach, executive vice president and chief financial officer. "We look forward to successfully closing and integrating Nexeo into our growth plan."

Company Performance

The results of Univar's operating performance are described below and, unless otherwise indicated, are a comparison of third quarter 2018 results with third quarter 2017 results, including Adjusted EBITDA, which is reconciled to reported net income in the accompanying supplemental financial information.

Segment Highlights

USA – Adjusted EBITDA  increased 10.0 percent to $99.4 million, which was the seventh consecutive quarter of growth. USA segment sales grew 8.5 percent as a result of improved sales force execution, higher average selling prices and higher volumes. Gross profit grew 6.2 percent, reflecting another quarter of strong industrial market demand in bulk commodity chemicals. Adjusted EBITDA margin expanded 10 basis points to 7.7 percent as a result of strong operating leverage.

Canada –  Solid double digit Adjusted EBITDA growth in the Eastern Canada industrial markets was more than offset by the absence of an expected recovery in the weather-impacted agriculture market and impact from a temporary but significant plant shutdown by a large customer in Western Canada. As a result, Adjusted EBITDA declined to $19.2 million from $25.2 million last year. Gross margin decreased 90 basis points to 17.8 percent while Adjusted EBITDA margin decreased 140 basis points to 7.0 percent.

EMEA – Adjusted EBITDA increased 15.2 percent, or 20.7 percent currency neutral, to $35.6 million due to double digit growth in Focused Industries, favorable mix and improved sales force execution. Gross margin increased 30 basis points to 22.8 percent and Adjusted EBITDA margin expanded 70 basis points to 7.5 percent, driven by sales force effectiveness, mix improvement and cost management.

Rest of World – Strong core performance, driven by growth in Brazil and increasing profitability in Asia Pacific operations, was offset by foreign exchange headwinds. Adjusted EBITDA grew 12.9 percent on a currency neutral basis, but fell 2.2 percent to $9.1 million on a reported basis, reflecting the change in foreign exchange rates. Gross margin increased 90 basis points to 21.8 percent and Adjusted EBITDA margin expanded 40 basis points to 9.1 percent due to changes in product mix and improved sales force effectiveness.

Outlook

While year-to-date Adjusted EBITDA grew 10.9 percent and Adjusted earnings per share grew 22.9 percent, the Company expects ongoing challenges in Canada and foreign exchange headwinds will likely dampen fourth quarter growth. In addition, while stable, the demand environment is exhibiting some softness in certain markets. As a result, the Company now expects fourth quarter Adjusted EBITDA to be essentially flat with last year's result.

The Company is revising its outlook for the full year to high single-digit Adjusted EBITDA growth and Adjusted earnings per share of approximately $1.60 per share ⁽¹⁾, an increase of 15.1 percent from the prior year.

"We continue to advance our strategic growth plan to improve our sales force execution and business mix, expand digital capabilities, and optimize supply chain operations," said David Jukes, president and chief executive officer. "We are confident we have the right plan and the best people to deliver superior returns to our shareholders."

Univar to Host Webcast on November 6, 2018 at 9:00 a.m. EDT

The Company will host a webcast with investors to discuss the third quarter results at 9:00 a.m. ET on November 6, 2018, which can be accessed on the Investor Relations section of its website at http://investor.univar.com. Following the event, an archived version of the webcast and supporting materials will be available on the same website.

Gross Profit, Gross Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted earnings per share

The Company monitors the results of its operating segments separately for the purposes of making decisions about resource allocation and performance assessment. The Company evaluates performance on the basis of gross profit, which it defines as net sales less cost of goods sold (exclusive of depreciation), gross margin, which it defines as gross profit divided by external net sales as well as Adjusted EBITDA, which it defines as its consolidated net income (loss), plus the sum of interest expense, net of interest income, income tax expense (benefit), depreciation, amortization, other operating expenses, net (which primarily consists of employee stock-based compensation expense, restructuring charges, other employee termination costs, business optimization, acquisition and integration related expenses, and other unusual or non-recurring expenses), loss on extinguishment of debt and other income (expense), net (which consists of gains (losses) on foreign currency transactions and undesignated derivative instruments, debt amendment costs, non-operating retirement benefits, and other non-operating activity). Adjusted EBITDA margin is Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA conversion ratio is Adjusted EBITDA as a percentage of Gross Profit. The Company believes that Adjusted EBITDA is an important indicator of operating performance because:

• The Company reports Adjusted EBITDA to its lenders as required under the covenants of its credit agreements;
• The Company considers gains (losses) on the acquisition, disposal and impairment of assets as resulting from investing decisions rather than ongoing operations;
• Adjusted EBITDA excludes the effects of income taxes, as well as the effects of financing and investing activities by eliminating the effects of interest, depreciation and amortization expenses and therefore more closely measures our operational performance;
• The Company uses Adjusted EBITDA in setting performance incentive targets in order to align performance measurement with operational performance; and
• Other significant items, while periodically affecting the Company's results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of its results.

The Company has incorporated an Adjusted net income and Adjusted earnings per share metric as a complementary metric to GAAP earnings per share to provide additional transparency to ongoing performance.  Adjusted net income excludes the same items as Adjusted EBITDA, except for stock-based compensation expense and non-operating retirement benefits.

Use of Non-GAAP Measures

The Company's management believes that certain financial measures that do not comply with accounting principles generally accepted in the United States ("GAAP") provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), gross margin (exclusive of depreciation), Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted earnings per share. Such non-GAAP financial measures are used from time to time herein but should not be viewed as a substitute for GAAP measures of performance. Reconciliations of non-GAAP measures to GAAP are provided in Schedules A and D.

The Company's management has provided Adjusted earnings per share guidance which excludes certain nonrecurring costs and expenses. While the Company expects that these nonrecurring costs and expenses will occur in the future, due to the uncertain nature and variability of these items, such as market changes affecting our defined benefit plans and foreign currency movements, it is not possible at this time, without unreasonable efforts, to estimate the amount or significance of these nonrecurring costs and expenses that may be included in projected GAAP earnings per share. The Company's management believes that these nonrecurring costs and expenses are not representative of the Company's underlying business performance and that Adjusted earnings per share provides the best estimate of future performance.

About Univar 

Founded in 1924, Univar (NYSE: UNVR) is a global chemical and ingredients distributor and provider of value-added services, working with leading suppliers worldwide. Supported by a comprehensive team of sales and technical professionals with deep specialty and market expertise, Univar operates hundreds of distribution facilities throughout North America, Western Europe, Asia-Pacific and Latin America. Univar delivers tailored customer solutions through a broad product and services portfolio sustained by one of the most extensive industry distribution networks in the world. For more information, visit www.univar.com.

Forward-Looking Statements

This press release includes certain statements relating to future events and our intentions, beliefs, expectations, and predictions for the future which are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control.  We caution you that the forward-looking information presented in this press release is not a guarantee of future events or results, and that actual events or results may differ materially from those made in or suggested by the forward-looking information contained in this press release.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology.  Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.