Investment case: Azelis

What makes the company different

Azelis is more than a distributor—it’s a strategic partner in product development, regulatory compliance, and supply chain efficiency. With 70+ innovation labs, it collaborates closely with clients to create customized solutions. For example, Azelis worked with a personal care brand to develop a sulfate-free, moisturizing shampoo. By sourcing gentle surfactants, natural oils, and conditioning agents from multiple suppliers, it formulated a product that met both the client’s performance and sustainability requirements while ensuring regulatory compliance.

Its scale, expertise, and strong relationships make it a one-stop shop for customers needing complex product formulations. As orders become more intricate, Azelis’ role grows even more valuable. Its vast network attracts both suppliers and customers, reinforcing its competitive edge in a market shaped by outsourcing, regulation, and demand for innovation.

Resilience and recurring revenues

Azelis is a resilient business with steady recurring revenue, exclusive supplier deals, and a flexible, asset-light model. Its specialty chemicals are essential in customer formulations, leading to long-term repeat business.

During COVID-19, Azelis proved its strength by maintaining stable revenues and growing earnings, as its chemicals are critical in recession-resistant sectors like pharmaceuticals, personal care, and food. With 62% of revenue from life sciences, strong supplier partnerships, and a flexible cost structure, Azelis is well-positioned to thrive even during economic downturns.

Management

Azelis’ leadership team is experienced, stable, and well-aligned with shareholders. CEO Anna Bertona has been with the company for over a decade, previously leading the European division, while CFO Thijs Bakker has played a key role in Azelis' financial growth since 2016.

Management has a strong track record of exceeding expectations. Since the IPO, they guided for 8-10% revenue growth but delivered 23%, and their margin improvements have far outpaced forecasts.

With insiders owning 5.6% of the company through the AKITA management vehicle, leadership has real skin in the game, ensuring a strong focus on long-term success.

Entry barriers, market share and pricing power

Azelis has strong pricing power because its specialty chemicals are essential to customer formulations and difficult to replace. Though used in small amounts, they significantly enhance product performance, ensuring steady demand.

The industry’s complex and opaque pricing structure allows Azelis to pass on cost increases with ease. Exclusive supplier agreements further reinforce this advantage—once a chemical is embedded in production, switching becomes nearly impossible.

High barriers to entry also work in Azelis’ favor. Its exclusive supplier relationships, regulatory expertise, and scale make it difficult for new players to compete. Customers depend on Azelis’ R&D support, making transitions costly and disruptive. With high retention rates and deep industry integration, Azelis remains a dominant force in specialty chemicals distribution.

Growth prospects

Azelis has achieved strong growth since 2018, with both revenue and EBITA increasing significantly at annual rates of 17% and 28%. This growth has resulted in improved profitability, with EBITA margins rising from 7% to 11%. This improvement is largely attributed to Azelis’ scalable, asset-light business model, which allows for efficient growth without the need for heavy investments in physical assets.

The specialty chemicals market is evolving, driven by factors such as increasing product complexity, greater outsourcing, stricter regulations, and industry consolidation. Azelis is well-positioned to capitalize on these shifts, operating in a fragmented market where the top 10 players control just 13%. The company benefits from making a dozen or so strategic acquisitions annually, which provide additional growth opportunities as outsourcing continues to rise. Azelis’ strong product offerings, technical expertise, and digital capabilities further differentiate it from smaller competitors.

Looking ahead, Azelis is expected to continue growing both revenue and EBITA margins, driven by organic expansion, strategic acquisitions, and favorable market trends—especially in fast-growing regions like Asia. As the company scales, profitability should continue to improve, supporting its long-term growth potential. With its strong position in an expanding market, Azelis represents an attractive investment opportunity for the future.

ESG

Azelis’ commitment to innovation extends to its ESG strategy, using its technical expertise and labs to create sustainable formulations for customers. For example, in the Home Care & Industrial Cleaning segment, Azelis reformulated a laundry detergent to reduce surfactants by 20%, addressing environmental concerns without compromising effectiveness.

Despite the chemical industry's ESG risks, such as water use and chemical waste, Azelis actively manages these challenges. The company adheres to Responsible Care® and Responsible Distribution® programs, and since 2020, it has been a member of Together for Sustainability (TfS), ensuring its supply chain meets global ESG standards. As of 2024, 84% of Azelis' revenue comes from ESG-assessed suppliers.

Investment case

We invested in Azelis for its strong growth, attractive valuation, and solid market position. Since its 2021 IPO, Azelis has nearly doubled operating income, but macroeconomic concerns and an equity overhang have pressured the stock, creating an entry point at 11x forward EBITA—30% below peer IMCD and its historical average. As the overhang resolves, we expect the valuation gap to narrow.

Azelis is well-positioned to benefit from trends like continued outsourcing, tighter regulations, and consolidation. With strong M&A execution, operational leverage, and market share growth, it’s poised for 10% annual revenue growth and expanding EBITA margin. This positions Azelis for mid-teens annual earnings growth.

Given the company’s strong fundamentals, scalable model, and favourable industry tailwinds, we are confident in its potential to deliver substantial shareholder returns in the years ahead.