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Germany's Brenntag predicts resilient 2023, reiterates plan to double M&A spend

By Tristan Chabba and Bartosz Dabrowski

(Reuters) -German chemicals distributor Brenntag forecast resilient earnings on Wednesday and reiterated plans to double its mergers and acquisitions spending in 2023.

Brenntag is facing calls from Engine Capital and PrimeStone to spin off its specialties business, joining other established German companies such as Bayer and Thyssenkrupp which are juggling similar investor demands.

Originally founded in 1874 as an egg-selling company, Brenntag flagged continued economic challenges, but said it expected the situation to gradually normalise over 2023, with core earnings (EBITDA) falling slightly below last year's.

It is targeting EBITDA of 1.6 billion euros to 1.8 billion euros ($1.90 billion) in 2023, compared with analysts' forecast compiled by Vara Research of 1.68 billion euros.

Brenntag Chief Executive Christian Kohlpaintner reiterated plans announced in November to double its M&A budget, which was previously between 400 million euros and 500 million euros.

Only Brenntag's essentials division, a wholesale business for process chemicals, beat earnings expectations last year, analysts at Jefferies said in a note, driven by double-digit growth in Europe, the Middle East and Africa and North America.

Engine Capital and PrimeStone are calling for Brenntag to spin off its specialties unit, which provides more complex services to industries such as nutrition, pharmaceuticals and household products, saying it would boost the group's shares.

Brenntag's full-year operational EBITDA (earnings before interest, tax, depreciation and amortisation) fell roughly in line with consensus, to 1.81 billion euros against 1.85 billion euros in a poll of analysts by Vara Research.

It also said it would propose a dividend of 2.0 euros per share for 2022, above the 1.45 euros per share last year and analysts' estimate of 1.92 euros per share.

Brenntag said late on Tuesday it planned to buy back 6.8% of its shares, worth up to 750 million euros, a move seen as a way to bolster shareholder confidence in the face of break-up calls.

Shares in Brenntag were up 0.08% at 1207 GMT.

($1 = 0.9493 euros)

(Reporting by Tristan Chabba and Bartosz Dabrowski in Gdansk; Editing by Milla Nissi, Kim Coghill and Alexander Smith)