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Univar's (UNVR) Q2 Earnings Beat Estimates, Revenues Up Y/Y

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·4 min read
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Univar Solutions Inc. UNVR recorded profits of $153.2 million or 90 cents per share in second-quarter 2021, shooting up from $1.8 million or a penny per share in the year-ago quarter.

Barring one-time items, earnings per share were 57 cents, up from 33 cents in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 50 cents.

The company’s revenues were $2,394.1 million in the quarter, up around 19.2% year over year.

The growth in sales was attributable to a favorable impact of chemical price inflation and higher industrial demand. However, this was partially offset by the exit of the Canadian Agriculture wholesale distribution business and the divestitures of the Distrupol and Canadian Agriculture services. Univar benefited from the advancement of its Streamline 2022 (S22) program and market share growth in the quarter.

Segment Review

Revenues in the USA division increased 28.3% year over year to $1,500.2 million in the quarter. The rise was primarily driven by higher industrial end-market demand and chemical price inflation.

The EMEA segment raked in revenues of $504 million, up 23% year over year. Chemical price inflation and higher industrial end-market demand were partially offset by the effects of the Distrupol divestiture.

Revenues in the Canada segment went down around 28% year over year to $238.6 million. The decline was mainly due to the Canadian Agriculture wholesale distribution exit and the divestiture of Canadian Agriculture services.

Revenues from the LATAM unit rose roughly 53.3% to $151.3 million, driven by higher demand for products in industrial solutions as well as chemical price inflation.

Financials

Univar ended the quarter with cash and cash equivalents of $207 million, a roughly 62.2% year-over-year decline. Long-term debt was $2,215.1 million, down around 23.7% year over year.

Net cash used by operating activities was $83.7 million in the second quarter, decreasing 44.8% from $151.7 million in the prior-year quarter

Outlook

The company expects adjusted EBITDA for third-quarter 2021 to be in the range of $175-$185 million. It also sees adjusted EBITDA in a band of $705-$725 million for 2021 compared with the 2020 figure of $635.8 million. Forecast for net free cash flow for the year has been reiterated in the band of $280-$300 million.

Under the S22 Program, the company is focused on improving adjusted EBITDA margins to 9% by the end of 2022 and expects to reduce leverage to 2.7x or lower by the end of 2021. It also forecasts 2021 year-end liquidity to be more than $800 million, inclusive of $100 million of debt pay-down in the second half of the year. Moreover, Univar expects more normalized margins and continued market share growth in the second half of 2021 as its aims for a more customer-centric approach.

Price Performance

Univar’s shares have gained 37.8% over a year, outperforming the 39.5% rise of the industry.

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Zacks Rank & Other Stocks to Consider

Currently, Univar carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space include Orion Engineered Carbons S.A OEC, LyondellBasell Industries N.V. LYB and Avient Corporation AVNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Orion has a projected earnings growth rate of 79.8% for the current year. The company’s shares have grown 68% over a year.

LyondellBasell has a projected earnings growth rate of 222.6% for the current year. The company’s shares have risen 59.2% over a year.

Avient has a projected earnings growth rate of 65.3% for the current year. The company’s shares have surged 96% over a year.


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