To Our Shareholders

This past year has been pivotal for Univar as we completed our first full year as a public company. It is a privilege to have stepped into the role of chairman and chief executive officer. My time as a Univar board member enabled me to jump-start my progress with the company and its leadership team. I am excited about our plans, which we believe will consistently deliver superior profitability growth.

We are the number one chemical distributor in North America and hold the number two position in Europe, allowing us to leverage our expertise across our global network to provide value to our customers and supplier partners. We are in an industry whose fundamentals support noteworthy growth based on expanding supplier needs for a consolidated distribution model and rising demands from customers for our broad line of products and services. There is great opportunity for us to capitalize on these trends.

In 2016, we took steps to get on track to deliver sustainable profitability growth over an intermediate and long-term period. We reinforced our management team by bringing our EMEA President David Jukes to lead and position our USA segment for profitable growth, and promoted Nick Powell to lead our EMEA business as he continues to oversee our APAC operations. We also recruited Eric Foster as our chief information officer to accelerate our digitization strategy. We began the process of changing our culture and mindset to focus on sustainable profitability growth and established our key strategic priorities of Commercial Greatness, Operational Excellence and One Univar, all while improving our safety metrics year-over-year.

Despite sluggish demand from global industrial markets, unfavorable foreign currency exchange rates and oil and gas headwinds, our EBITDA outside the United States grew by double digits and our consolidated EBITDA margins expanded. Following six quarters of year-over-year consolidated EBITDA declines, we are pleased that we turned the corner and achieved EBITDA growth in the fourth quarter. We generated strong free cash flow and lowered our debt levels and leverage ratio while completing two acquisitions — Bodine Services of the Midwest, which broadens our service capabilities in our ChemCare waste management business, and NexusAg, a micronutrients distributor to the agriculture industry in Canada. As we began taking action, the stock market took notice. Univar shares reached an all-time high of $28.87 on December 29, appreciating 67 percent during the year and outperforming the S&P 500 by more than sixfold.

Following six quarters of year-over-year consolidated EBITDA declines, we are pleased that we turned the corner and achieved EBITDA growth in the fourth quarter.  

We are just beginning our transformation and, though we are making great strides, we have much work and opportunity ahead of us. Our three strategic priorities — Commercial Greatness, Operational Excellence and One Univar — position us to increase our market share and capitalize on industry outsourcing trends, creating value for our customers, supplier partners, employees and our shareholders.

Our three strategic priorities

Our company must improve our commercial execution in order to succeed and grow in the marketplace. In today’s economy, with tight customer budgets, we must demonstrate to our customers the value we create for them through our comprehensive suite of products and services and our dedication to deliver market expertise using a value-based selling approach. We are investing in improved training and tools for our sales representatives to make sure they are well equipped and skilled. To cultivate a common language, a solutions provider approach, effective coaching and consistently high expectations, we introduced a rigorous salesforce training program. Our focus on better accountability and rigor with our sales management team also led us to put in place new controls and management processes. On January 1, 2017, we adjusted our USA sales incentive structure to reward extraordinary customer service and new business development that drives profitable growth in a way that aligns our sales representatives with our customers and the new convictions of our organization. We are committed to being at the forefront in our hiring, training and compensation practices for our salesforce to foster best-in-class execution.

As we improve our commercial execution and support our customers’ and supplier partners’ goals, we will become more valuable to them and, in turn, will earn more of their business.

 

We are working to build a culture where discipline and rigor are a way of life. Improving our operating performance and finding efficiencies to lower our cost per transaction are at the core of our Operational Excellence initiatives. We are embedding Lean Six Sigma methodology across our organization to improve the productivity of our operations. We are embarking on many opportunities to simplify and automate our processes. We are pursuing innovation and deploying technology tools that will lower our transaction costs, improve our customer experience and drive e-commerce opportunities. In addition, we are undertaking projects to increase the efficiency of our warehouses, terminals, tank farms and logistics, optimize our footprint and improve our net working capital. In short, we are galvanizing a seamless way to conduct business with and within Univar.

Our on-time delivery rates, already one of the best in the industry, improved during the course of the year, exceeding 96 percent on a global basis. Our leading safety performance also advanced, showing a year-over-year improvement of nearly 30 percent in our total case incident rate. These key differentiators are instrumental to bestowing value to our customers and supplier partners.

 

One Univar unites us in our guiding principles to value our relationships with our customers, supplier partners and one another; succeed through exceptional performance; thrive on profitability growth through new markets and opportunities; and do so safely and with integrity. We are developing a healthy, high-performance culture through the selection, recognition and development of engaged employees to create an environment where the best people want to work. That environment is one in which we leverage our know-how, best practices and scale to create consistency and maximize global effectiveness. Achieving Commercial Greatness and Operational Excellence is made possibly only by highly motivated employees who create purpose for each other, our customers, supplier partners and shareholders.

Look Ahead

Our unwavering pursuit of accomplishments in line with our three strategic priorities represents a powerful transformation formula for near and long-term growth. We have a treasure trove of opportunities that will enable our success. This will take some time, but we are going about this the right way to build a strong foundation that is consistent and sustainable. We will execute our strategy within our current economic framework, using our strong, stable cash flow to reinvest for growth, but remain asset-lite, reduce debt and deliver admirable returns. We look forward to the excitement and satisfaction that will come from executing our strategies and creating value for our customers, suppliers, employees and shareholders.

Before concluding, I would like to recognize several new board members — Daniel P. Doheny, Edward J. Mooney, Stephen W. Shapiro and Robert L. Wood. These individuals bolster our already strong and experienced board. I am deeply grateful for the wisdom and insights each member of our board extends to Univar and me.

My gratitude also goes out to our passionate Univar employees and management team for their commitment to the execution of our strategy. I thank our shareholders for their confidence in our path forward. As One Univar, we are adamantly pursuing Commercial Greatness and Operational Excellence and, in turn, igniting sustainable growth.

Stephen D. Newlin
Chairman, President and Chief Executive Officer
March 2017