Specialist
Former C-level executive at Azelis Holding SA
Agenda
- Market structure – incentives between distributor, supplier and customer, outsourcing vs insourcing and benefits of scale
- Potential IPO and Azelis’s competitive positioning in speciality chemicals distribution vs larger players such as IMCD (AMS: IMCD)
- Growth potential – value-added services penetration growth and acquisition options
- Supplier base exclusivity and strengths vs peers
Questions
1.
Can you outline why the chemicals market is structured how it is? Players seem to be increasingly outsourcing distribution. What is the role of a speciality distributor such as Azelis vs a more commodity distributor such as Brenntag or Univar?
2.
How is the outsourced vs insourced distribution ratio changing? Is outsourcing increasing as suppliers seek to outsource large customers to distributors, or are customers consolidating and increasing in size, with suppliers then wanting to handle them internally?
3.
What’s your outlook for the trend where the constant interchange between customers gets so large that suppliers bring them back in house vs giving customers to distributors? What’s the likelihood of this becoming a risk where customer consolidation meaningfully pulls customers back into the supplier’s hands?
4.
There are price increases across the chemical market. Do you think there are areas within the chemical landscape where these price increases are part of the new up cycle or do you expect pricing to normalise?
5.
Do you think there’s a significant risk of a pricing reversal for the chemical distributors’ working capital in the near term? Could you compare the 2008 downturn dynamics to 2020?
6.
I’ve heard in previous Interviews that contracts can have counter-cyclical contribution margins based on volumes – the pricing per unit can increase if volumes decrease. Would you expect this at Azelis?
7.
Volume and pricing declined in the 2008 downturn, but pricing increased in 2020 while volume declined, so there were counter-cyclical margins. What do you think is the probability of a future downturn being more like 2008 or more like 2020?
8.
Can you outline how Azelis and IMCD’s working capital typically works when pricing and volume decrease at the same time and then when volume decreases but pricing increases?
9.
What’s the risk that certain chemicals in Azelis’s inventory could be banned? Glyphosate could experience regulatory change.
10.
Azelis wants to raise EUR 880m for the potential IPO. What would you expect the user proceeds to be?
11.
Azelis wants a EUR 5bn valuation and IMCD’s enterprise value is around EUR 10bn. What are your thoughts on these figures? Do you think IMCD should be valued at 2x Azelis?
12.
Azelis had 23% EBITA growth over the last five years, while IMCD had 15%. What’s driving each player’s growth? Is this a pure base effect or do you think IMCD could continue to catch up?
13.
IMCD’s industrials revenue is about 20% larger than Azelis’s. Would IMCD meaningfully benefit from dealing with larger suppliers? Its customers are typically medium-sized.
14.
Do you think the industrials businesses will converge in size or might IMCD remain larger? How do you consider the economies of scale vs the curve of learning?
15.
I believe Azelis has 60 labs vs IMCD’s 55 and its sales team business is 17% larger than IMCD’s. How would you compare these figures and the companies’ ability to function based on their labs and employee bases?
16.
Is IMCD top of the list for a university graduate vs Azelis, or is the talent pool between these two companies relatively similar? Is this important?
17.
IMCD’s EBITDA was 2pp higher than Azelis’s in 2016. Can Azelis catch up? It may have done so over the past five years. Is there a structural reason why IMCD would have higher margins?
18.
What are your thoughts on Azelis’s recent M&A spree, particularly its June 2021 acquisition of Vigon?
19.
What are your thoughts on Azelis’s recent IT and integrated system push?
