The top line has already matched the Q1 19 level, but profitability could not fully catch up, despite the optimised business structure, which might be related to the strongly rising raw material prices. Additionally, management managed the organic momentum of the growth well as NWC outflow remained quite stable. Management has become more optimistic after the clear beat in its Q1 guidance.
Figures were slightly above our expectations and beat street estimates.
Companies: Arkema (AKE:EPA)Arkema SA (AKE:PAR)
Arkema’s increasing footprint in speciality chemicals helped to protect profitability. Furthermore, management has taken the next steps towards the mid-term target, even in a crisis. By divesting PMMA, its has taken advantage of a special situation, allowing for a decent valuation.
Unfortunately, the company still fully consolidates the to-be-divested business showing up our estimates. Consensus was clearly beaten as it still included the PMMA business.
Like other chemicals companies, Arkema had to manoeuvre in challenging times, but the adhesives business was an anchor with its quite resilient business. The other divisions were in rough seas, as expected, giving a mixed picture from a variety of impacts. Intermediates was negatively affected by all factors. The newly-provided guidance looks like a strong commitment.
The Q3 figures were a notch stronger than expected, but matched well with the street’s expectations.
Companies: Arkema SA
Like other chemicals, Arkema could not escape from the developments in the customer markets. Nevertheless, the speciality side of the company did quite well despite some meaningful declines in volumes, whereas Intermediates was hit by lower volumes and lower prices. All divisions saw a strong drop in profitability. The divestment proceeds of Functional Polyolefines were a tonic and helped profitability to beat our expectations. Consensus was also beaten.
Arkema’s business model is still a chemicals one, even though the specialities’ share has increased in the recent past. Interestingly, management’s strategy to focus on adhesives seems to be paying off. In addition to the spreading virus, the country, where Arkema has its headquarters, also had an adverse impact on profitability. Q1 came in a notch weaker than we expected. Consensus was perfectly met.
Arkema reported a better than expected set of figures (consensus was perfectly met on the profitability level). The portfolio changes in recent years have made the company’s financial mechanics more resilient to economic downturns. Despite all current uncertainties, management seems to be quite optimistic for 2020 – at first sight. But it has excluded any virus-triggered effects, which are estimated to be around €20m by the end of February.
The good point is that the EBITDA margin has not faded away as Arkema’s top-line was driven by an acquisition and FX tailwinds. However, lower raw material prices put some pressure on it. Volumes developed positively in most divisions.
Reported figures beat our expectations, but were below consensus. For Q4, we remain cautious.
At Group level, given the tough environment, Arkema’s results proved fairly resilient. After the company’s ‘overhaul’ in recent years and the increase in the proportion of specialties’ sales (to 71%), no one would have expected Coatings Solutions to report higher profitability. Despite confirming FY guidance, management indicated some weakness in H2. The figures did not fully meet our expectations (profitability undershoot), but consensus was beaten.
The announced acquisition of ArrMaz has a reasonable strategic rationale, but it also stresses Arkema’s gross debt. We do not expect any large issues that may prevent approval from the anti-trust authorities or affect financing. All in all, we value the announced deal as positive, despite being quite expensive.
Arkema’s negative organic development was characterised by lower demand from some industries as the implementation of higher sales prices to cushion higher raw material prices partly offset the lower volumes. After a period of margin expansion, Industrial Specialties saw organic regression, but defended the margin more or less. Coatings Solutions was driven by volumes.
Consensus was met, but our expectations were barely met.
Thanks to the differentiation, Arkema had a favourable business year. As High Performance Materials took a breath after recent years’ strong growth and with Coating Solutions suffering from a mix of higher raw material prices in some segments and high capacities in others, Industrial Specialties became a strong contributor to sales and earnings. Figures were above our expectations but did not meet the consensus. The higher than expected dividend could be valued shareholders’ pain killer as guida
Arkema was in a position to increase sales prices, especially in Industrial Specialties and Coating Solutions, in order to pass on higher raw material prices, notably acrylic acid and PMMA precursors. In general, PMMA is expected to see a stronger relief in Q4.
The Q3 figures met our expectations and slightly beat consensus. At first sight, it looks as if management had confirmed the recently-lifted guidance, but the footnote shows a kind of narrowing to ~5%.
Arkema not only passed on higher raw material prices, it also increased its profitability, especially in Industrial Specialities, where the acrylic glass business faced tight market conditions. Q2 figures were above our expectations and beat consensus.
Arkema has spent many quarters in the doldrums and it looks now as if the company could take full advantage of recent developments in the next quarters. The company is in a position to overcome adverse FX developments by higher positive organic growth, which looks to be a rare case in current reporting.
Arkema’s figures were slightly above our expectations, but met consensus.
Arkema’s FY figures broadly met our expectations. Net income benefited more strongly from the US tax reform than expected. Profitability was stronger than sales, which was partly the result of good pricing power. Q4 looks slightly different with a lower margin, which might be a mix of seasonality and a slight delay in passing on higher raw material prices in some businesses.
Consensus was beaten.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Arkema SA.
We currently have 8 research reports from 2
We think three big themes will govern the next 18 months. Recovery – the settled shape of many supply chains as we exit COVID is uncertain. Online buying and B2C activity has accelerated but also traditional high-street focused B2B distribution channels will recover. Operators are focused on how to respond to a changing and more fluid demand mix; and managing higher costs. Technology – much of the logistics world is still labour intensive and we think there is plenty of scope for efficiency gain
Companies: CLG DX/ WIN XPD
Powerhouse has moved to de-risk potential sources of delay in the key Protos waste to hydrogen project by providing a £3.8m loan to the project. When the company raised £10m in January we expected this to help expedite the project and today’s loan is a practical example of how this funding is benefiting the project.
Companies: Powerhouse Energy Group PLC
Inspiration Healthcare has announced an additional order worth over £1.25m for ventilators to be sold through its Chinese distributor. This new order follows the regulatory approval of the SLE6000 ventilator in China, announced in April 2021, and the £250k order placed at that time. We note that these Chinese orders follow on from the announced Japanese regulatory approval of the ventilator and c£400k order placed at that time. We maintain our Buy recommendation.
Companies: Inspiration Healthcare Group PLC
Complex accounting, made simple.
Following on from our Explainer Note 1, which covered Partner Remuneration, we now investigate the Deferred Consideration entry in the balance sheet. Based on our discussions with investors and the company, this is a point that requires clarification.
By removing this (and other) impediment(s) to understanding Ince's operations and finances we hope that market participants will be better placed to value this company on its many merits and consider only t
Companies: Ince Group plc
Eden Research has announced the signing of an exclusive commercialisation, supply and distribution agreement with leading agriculture input company, Corteva. This follows the successful completion of the previous evaluation agreement. The new agreement sets out the development, regulatory and commercial path, which could see the final seed product launched in time for the 2024 growing season. The two companies will work together to develop this product and further uses of Eden's products in the
Companies: Eden Research plc
Velocys, the sustainable fuels technology specialist has issued (17 May) its FY2020A results to December 2020. Despite the challenges of the pandemic, Velocys has continued to service its clients well and further its development project pipeline, including advancing industry discussions on ‘off-take’. We continue to believe that Velocys is strongly positioned in its market with its proprietary proven and scalable technology, long-term structural/regulatory growth drivers and strong management te
Companies: Velocys plc
c. £241m firm placing at the top of the target range of £190m to £240m at a 17% discount. As expected the raise will be used to reduce the debt and fund investment. This is the final milestone in the group’s strategy. There is no update on trading but as we wrote last month Kier is turning a corner. We show our key placing assumptions. We estimate 6% and 60% FD EPS dilution in FY 21 and FY 22 respectively. We expect net cash at FY 21 and close to average cash neutral in FY 23. TP unchanged at 15
Companies: Kier Group plc
Velocys made strong progress during 2020, beyond what can be seen in relatively flat reported numbers. The delivery of reactors and catalyst to Red Rock Biofuels shows that the company can meet commercial demand, the successful running or the Nagoya demonstration has led to a commercial collaboration and fund raising in the period will allow progress at the two reference sites in the UK and the US.
Invinity Energy Systems plc (IES LN), a UK based Vanadium Flow Battery (VFB) technology company, has today announced that it has entered into a contract with Webcor, a leading Californian construction firm, to provide a VFB for a project developed by Indian Energy LLC, a 100% Native American-owned utility-scale and microgrid development and systems integration firm with approximately 4 GW of solar PV and wind and 6 GWh of energy storage projects under development. This project is located on a US
Companies: Invinity Energy Systems PLC
Despite COVID Directa Plus continues to trade well with revenues of €2.8m for the first four months of FY21 showing the company is on track to exceed our prior full year expectation and we have upgraded our FY21E and FY22E revenue expectations by 4%. Directa Plus has demonstrated material conversion in two key environmental technology business lines which we believe, and demonstrate in this report, each alone justify the current market capitalisation:
In environmental remediation, its unique Gr
Companies: Directa Plus Plc
Directa’s FY20 prelims confirm a year of strong of progress despite the challenges of COVID. Total income of €6.8m and an EBITDA loss of €2.6m are both slightly better than our forecasts and we upgrade FY21 revenue expectations (from €7.5m to €8.2m) to reflect a positive start to FY21; revenue in the first four months increased by 49% year on year. Future prospects look bright with exciting new opportunities emerging in high-potential application areas, notably Lithium-Sulphur batteries.
The group’s 10-month trading update is positive, with the group expecting to exceed FY21 expectations. Trading momentum continues, following its record H1 with strong underlying market demand in new build housing and RMI sectors. It has also seen market share gains and good export sales. The turnaround of Levolux continues, combined with the £2.4m of cost savings gained underpins margin improvement. We upgrade our forecasts for FY21, increasing EPS by 9% to 21.7p. In FY22 we also upgrade EPS by
Companies: Alumasc Group plc
DX has highlighted that trading since the interim results were reported has been stronger than expected. Higher volumes in Freight, driven by new business wins and existing customers, mean sales are now expected to be £10m higher than existing forecasts. DX’s strategy of winning market share supported by superior service levels is delivering, aided by a significant competitor moving away from the irregular dimension and weight market. We have upgraded our FY 2021 EPS by 19% and FY 2022 by 7% (ma
Companies: DX (Group) Plc
Positive revenue momentum has continued, once again driven by the Freight division. Volume growth has come both from existing customers and new business wins. This growth is seen as sustainable, and DX is accelerating its plans to expand its depot network. Management expects adjusted PBT to significantly exceed current market expectations. We raise our EPS forecasts by 17% for the current year. Our recommendation remains BUY, and we raise our DCF-based TP to 40p from 38p.
Checkit reported 23% y-o-y revenue growth for Q122. Normalising for the acquisition of Checkit US at the start of the quarter, group revenue increased 15% y-o-y. Recurring revenue made up 35% of total revenue, up from 32% in Q121 (normalised), as Checkit continues to transition customers to subscription contracts. The company is accelerating investment in sales, marketing and product to drive customer acquisition. Q122 annual recurring revenue (ARR) grew 7% q-o-q and, while early in the year, is
Companies: Checkit plc