Author Topic: UNVR - Univar  (Read 3344 times)


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Re: UNVR - Univar
« Reply #20 on: August 13, 2020, 10:37:48 AM »
^FWIW, Brenntag published their RIOC and how they calculate it in their annual report. Their number was ~13.6% from memory and it went down a bit due to inclusion of lease liabilities.

This also includes all the intangibles and right of use. Total invested capital ~5.7 B Euro ( from Memory). The real ROIC number may be a bit higher, if you take into account some amortization.

Brenntag‘s numbers are very Transparent and easy to understand. I really like how they go about their business.

Univar is messy. If I have the choice between taking a one foot vs a three foot hurdle, I take the one foot one any time.


I agree that Brentag is cleaner.  But I think upside is higher with Univar.  I find it fascinating that Brenntag and all of these specialty chemical companies publish these high single digit to low teens ROIC figures.  But then if you take a P/E approach and ask yourself how much capital you need to run the business and what your cap ex/EBITDA numbers are, they are way higher than the numbers quoted by the company.

Also, I ask myself "what is the return on capital for having to hold some inventory for your customers, buying some trucks and owning some warehouses."??  It doesn't seem like a super capital intensive business.  All of these intangible and goodwill calculation.  At the end of the day, I ask myself "if I were a private owner, how much do I need to generate $1 of FCF"? 

It is one of those "the man is fat, we don't need to weigh it" and I am really confident that it is not a low teens figure.  It is at least 20% with the levered ROE much much much higher because the business is so resilient.   

But a split allocation between Brenntag and Univar probably makes a lot of sense.   

I love hearing these real world feedbacks.  Thank you so much.

Btw, do you have any takes on the corrugated boxes business?  WestRock could be interesting.  These business look like commodity businesses.  But when they have scale, there is quite a bit of advantage in sourcing etc.

We purchase a lot of corrugated for our product, and I will say that switching for us is a big deal. Getting new print plates made for hundreds of SKUs takes a lot of time because every single one needs to be approved.
I don't know as much about the corrugated assets but they have similarity to towel and tissue paper machines and I will say that bringing one of those bad boys online is a big undertaking, hundreds of millions of dollars, and lots of permitting to be close to a water source. There is a commodity element to it with exposure to OCC prices, but as long as they keep their balance sheet in decent shape, I think the competitive positions are pretty strong. But I really haven't look at them as an investment.

I honestly don't know how that works with having conflicts of interest. Some of our vendors and customers are public companies, but I have so far stayed away despite some of them being well-run companies and good long-term investments (historically) to avoid any perceptions of conflicts or anything like that. I don't know if I'm being too cautious but those are my thoughts at the moment.