Specialist
Former President at Univar Inc
Agenda
- Key trends and demand in US chemicals
- Univar’s Nexeo acquisition, integration and synergy expectations
- Relationships with key customers and suppliers
- Growth strategy and competitive dynamics
- 2019 outlook
Questions
1.
What key points should investors be examining when evaluating the US chemicals space and its future?
2.
How does that 3.8% growth rate for the US chemicals space change based on the broader economy? How does that work in a recession?
3.
Does weakness at the chemicals producers level change their propensity to work with a distributor?
4.
You mentioned the entrance of IMCD and the European distributors into America. How successful have you seen them being? What are some of the barriers to entry into the US market?
5.
We’ve seen a little bit of de-stocking in the chemicals sector recently. How has this impacted distributors? Is there anyone who might be more or less exposed?
6.
What do you see as the overarching logic of Univar’s acquisition of Nexeo? To what extent does it make sense? When we last spoke, you seemed to view a large-scale acquisition as unlikely (see Third Bridge Forum transcript – Univar & the Chemical Distribution Sector – 12 September 2018).
7.
Inclusive of the IT system, how do you think Univar best goes about this Nexeo integration? What’s your expectation for a timeline?
8.
What are the major buckets that you think Univar is going to be targeting for cost synergies or savings? How should we think about the magnitude and timeline of what it might be able to take out?
9.
How is the sales force going to integrate? How do Univar and Nexeo go about rationalising that headcount?
10.
Regarding warehouse overlap, is there any way to think about how much of that might be closed or what that footprint looks like for Univar and Nexeo?
11.
You said there was opportunity for warehouse footprint consolidation within Univar alone. Can you explain what kind of opportunity, and why the company hasn’t taken advantage of that?
12.
Sales force effectiveness has been a struggle for Univar historically. Can you discuss why that might be the case, the higher-level quality of the sales people or the way it’s organised and to what extent this could improve as a result of the merger?
13.
How does the customer really view the Univar-Nexeo merger? Does this change the way they’re looking at working with the company?
14.
Do you think the Nexeo acquisition meaningfully improves Univar’s position on the negotiating table with their customers? Does the scale give it any pricing power?
15.
Do customers usually work with more than one distributor, in the sense that they might want to hedge their bets to push some volume to another distributor?
16.
How might Univar quantify its potential customer attrition as a result of its Nexeo acquisition?
17.
Can you explain customer concentration for Univar and Nexeo? They both tout that they have relatively little revenue concentration. Is there any chance they develop some as a result of merging two clients?
18.
From a chemical distributor’s standpoint, what factors impact the profitability of any given customer?
19.
What does the difference between the highest-margin and the lowest-margin products look like from a chemical distributor’s perspective?
20.
Across a chemical distributor’s customer base, is it relatively uniform as to how much is bought speciality vs commodity, or is all the speciality concentrated in fewer accounts?
21.
If we put this all together, as we say, there’s not too much issue with revenue diversity. Is there any way to think further down the income statement? Is there a proportion of the chemicals distributors’ customer base that makes up a disproportionate EBITDA contribution?
22.
Can you explain how pricing in the US chemicals industry is set? From a distributor’s perspective, are you talking cost plus a certain percentage or cost plus a certain dollar value?
23.
Can you compare Nexeo with IMCD?
24.
Returning to the sales team, it seems that the relationship between the customers and the chemicals distributor is based heavily on the relationship with the actual sales person. Is that fair?
25.
How would you assess Univar’s relationships with its suppliers?
26.
How might suppliers be viewing the Univar-Nexeo merger?
27.
Would those suppliers keep certain product lines with the combined Univar-Nexeo, or would they pull everything from it? Could Univar lose certain product lines?
28.
How much business might Univar lose from supplier conflicts specifically?
29.
You seemed to suggest that a broader economic downturn wouldn’t be too impactful upon distributors’ sourcing from chemicals suppliers. If we look back at 2008-09, that doesn’t seem to gel with what happened with Brenntag. Is there anything in the broader market that’s different between the two scenarios?
30.
You discussed the broader risk of chemicals suppliers going back into distribution. Could you elaborate on that? It’s perhaps unlikely, but what would be the impact of some of the larger distributors trying to do so?
31.
From a high level, how do supplier authorisations for speciality products work?
32.
We’ve mentioned the divestiture of Nexeo’s plastic business. Who could be a logical buyer for that? What might be a valuation there? Is there anything else in its portfolio that it could try to divest?
33.
Do you have any sense of what percentage of revenues Univar lost as a result of its ChemCentral acquisition, and if that’s applicable to the situation with Nexeo?
34.
Is there anything that we’ve not paid enough attention to today, or that we should pay particular attention to in future when evaluating the combination of Univar and Nexeo?
35.
On a timeline of 12-18 months after the Univar-Nexeo merger closes, what do you see as a best- and a worst-case scenario?
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