Too shy?

We understand that Wacker’s management had a difficult task after the strong start to the year. On one hand, we might have expected an upwards revision to the guidance and, on the other, the risks and uncertainties have increased in recent weeks and it would be negligent to ignore them. But investors have their own view, looking at the sharp share price drop. However, reported sales growth was +4.6% and EBITDA was +8.0% ahead of consensus.

Polysilicon’s resurgence

Wacker reported a strong final quarter. In a nutshell, FY 2021 was an exceptional year pushing the proposed dividend to €8 per share, but business will soften in 2022. After the release of the preliminary figures in January, consensus was still beaten (sales: +0.9%; EBITDA: +5.8%; net income: +7.7%). We have already lowered our estimates in the light of skyrocketing energy and raw material prices, despite our strong view on the company.

Full steam into 2022

Wacker released a set of additional figures which gave a better picture: 2021 was the best year since the IPO in 2006! EBITDA exceeded the 2010 record high, which had been not really in reach for many years. This strong performance was mainly driven by substantial profitability gains in Silicones and Polysilicones due to better prices. Despite management’s reluctance in providing an outlook so early in the year, it sees a continuation of the high demand in its product portfolio.

Beating oneself

Wacker’s Q3 figures were a strong show of force in the P&L development. The performance left scratch-marks in the NWC inflows, which we believe will be patched up in Q4. Strong demand (1/3rd) and higher sales prices (2/3rds) were the drivers. Meanwhile Polysilicon’s business environment looks completely different compared to the beginning of the year with a strong positive effect on profitability, which has already forced us to take a positive stance.

Strong guidance increase

Despite the easy comparables, management increased its guidance once again, especially on the profitability level. The beat to consensus was not meaningful (top line: +2.5%; profitability: 0%), but the reported figures were above our expectations. Silicones was a quite nice surprise. Polysilcon seems to be on its way to historic heights.

Ready for the green phase

Wacker, like its peers, had a head start into beating its own rough guidance as well as our expectations and consensus, which was mainly attributable to significantly higher volumes as the passing on of higher raw material prices did not make a meaningful contribution. The top-line development helped the profitability line, which was additionally supported by the ongoing cost-cutting programme. As we felt a certain conservatism in the earlier guidance, it looks to us as if management has greater

From party pooper to drag horse

Or Polysilicon’s ‘reincarnation’, which is expected by management looking at the strong profitability guidance and the potential contributors. The high dividend proposal (€2.00 per share; AlphaValue: €0.50) looks to us like a sounding for a strong 2021. As Wacker had already announced preliminary figures (not very difference to this), the focus lies on the details and the 2021 perspectives. After today’s management presentation, we have become more confident for 2021.

The expected strong Q4

Wacker Chemie’s preliminary figures confirmed our expected profit increase in Q4, bringing Polysilicon’s EBITDA back into the black, also on a FY basis. The chemicals divisions painted a mixed picture in the last quarter, but all remained on the profitable side. Our top line as well as EBITDA expectations were beaten. The same was true for consensus.

High hopes of the EU's Green Deal

Wacker’s Q3 figures showed a clear profitability improvement in Polysilicon and Polymers was a real positive surprise. We had expected a stronger performance in Polysilicons, but the figures met our punchy expectations at group level. Consensus was beaten.

It is more about volumes

Wacker’s reported figures confirmed our broad picture of the company. The weaker performance was mainly driven by lower volumes rather than lower prices. The implemented cost-cutting measures did not really materialise. Consensus was barely beaten.

Missed opportunity

We value Wacker’s first virtual Investors Day as a good approach to communicate with investors, but it failed in a key aspect: helpful information. In essence, management did not provide additional strategic guidance nor additional figures. Our expectations might have been too high, but some cost figures on the months-ago announced cost-cutting measures would had been highly appreciated as, on the contrary, Wacker is willing to accept Polysilicon’s cash drain also for an undefined future.

Still cash-absorbing Polysilicon

Wacker has been working on its still loss-making polysilicon business, but the losses have not gone go away. Thankfully, Wacker is also active in the oil-based value chain, which gave EBITDA quite a nice push in addition to some lower corporate costs. In the light of the pandemic, management initiated some measures (lower capex) as expected. The Q1 figures were better than expected, especially profitability, which is also true for consensus.

Quite strong 2020 guidance ...

... but excludes the potential effects from COVID-19 and the cost-cutting programme. The reported FY figures were pretty much in line with those already communicated. Management’s dividend proposal does not reflect confidence. We understand that Wacker is struggling with the potential COVID-19 impacts, but that the (positive and negative) effects from the cost-cutting programme are still not determined, which does not look very professional to us.

In case of emergency ...

In a manager’s training (?) book there is usually a chapter on how a manager should behave in an ‘emergency’ situation. It looks to us as if Wacker’s management has done just this. The announced efficiency programme pulls the ‘usual’ strings, but we don’t see the additional strategic announcements. So the proposed measures (local ones still have to be accepted by German employee representatives) are unlikely to be very meaningful.

Good to be a family-backed company!

Wacker’s preliminary report confirmed our cautious view on company’s management as we think a necessary (?) write-down is one thing, but not providing a strategic solution for the ailing polysilicon business is another thing. The photovoltaic business value chain has become dominated by Chinese companies for many reasons over the past year, but there are only some small business adjustments in this regard. We highly recommend any kind of solution for Polysilicon.

Supreme (SUP LN) - Initiation of coverage

FY24 Interim results: A record H1 performance delivered revenue growth of 62.5% to £105.1m (H1 FY23: £64.6m), with growth across all divisions: Batteries +1.4%, Lighting +21.8%, Sports Nutrition & Wellness +17.5%, Vaping +32.5% (ex- ElfBar) and Branded Distribution +798.9%, which includes revenue of £26.4m from the ElfBar distribution opportunity, commenced in June. Adj. EBITDA of £15.2m is +88.0% (H1 FY23: £8.1m) benefitting from higher sales, and operational efficiencies. Adj. PBT of £12.6m is

TClarke - £1.1bn order book and delivery protection measures

TClarke has confirmed it is on track to deliver its three-year growth-plan target of £500m of revenues in 2023E (up from £426m in 2022). It detailed a 99% increase in the order book to £1.1bn alongside a further £1bn in opportunities. Reflecting the current challenges in the construction sector, management has made a number of strategic decisions to preserve the business’s strong market and financial position. These include changing some supply-chain partners mid-contract to protect project comp

Brickability Group - A diversified and resilient model

Today’s interims are in line with the recent trading update (11th October) and as such we make no changes to forecasts. Revenue of £324.8m represents a LFL decline of 14%, with EBITDA of £25.6m (H123: £25.5m). This is a strong performance, against what is a challenging market backdrop and underlines the benefits of its diversified operating model and focused strategy. We therefore continue to be surprised at the weakness of the share price, especially in the context of a broader peer group. Putt

Morning Note – 28 November 2023

Morning Note – 29 November 2023

Supreme Plc+ (SUP, House Stock at 110p) - Exceptional H1 - 'significantly' raised FY24F guidance

Epwin (EPWN LN) - Confirmation of FY23 estimates and buyback announced

Epwin has released a brief trading update confirming that it is on track to meet FY23 estimates. It has also announced its intention to start a buyback, indicating the Board’s confidence in the business going into FY24, despite the volatile operating environment. Zeus leave profit estimates unchanged across the forecast period. This is a continuation of the performance over the last few years, the business has met or beaten consensus numbers since FY20, has not raised equity and managed its bala

Strong H1 results raise full year outlook

The H1 outcome was as indicated in the recent (18 October) Trading Update. Group guidance for the full year is now raised: from revenue of £195m - 205m to £210m - £220m (ED estimate was £204.2m); (adj.) EBITDA from £28m - £30m to £32m - £35m (ED estimate was £29.0m). From incremental EBITDA of c.£4.5m, c.£1.5m arises from core operations and c.£3.5m from the Elf distribution agreement, which supplies retailers including Tesco, Morrisons, One Stop and WHSmith. A series of initiatives – branding

Van Elle Holdings plc (VANL LN) - Trading in line with FY24 expectations, completion of Rock & Alluvium acquisition

Van Elle has released a pre close trading update for HY24 confirming it is trading in line with expectations. Revenue is down 16% yoy to £68.0m which is broadly in line with Zeus expectations for FY24 of 12.1% decline in revenue, pre the addition of Rock & Alluvium. Estimates are updated on the back of the completion of the deal increasing revenue by 6% in the current year to £138m and 11% to £155m in FY25. Zeus leave profit before tax estimates unchanged at £5.0m in FY24 due to integration cost

PROGRESSIVE: Xaar: Market malaise drags into 2024

Xaar has released a trading update for 2023 that includes cautious commentary around 2024. The group is expecting a strong end to the year in terms of profitability, albeit with depressed revenue levels. Sales pressures are expected to continue in 2024 and, combined with downward pressure on prices and cost inflation, are likely to lead to a materially reduced level of profitability. We alter our estimates for both years to reflect the update. Although the group is clearly navigating tough marke

LIBERUM: Restocking Indicator still says BUY: Equities lift too

UK-Listed Energy Sector: Review of the UK oil and gas landscape – why the country needs it, current policy and tax

The front of this note takes a look at the UK oil and gas sector, why domestic production is advantageous, what the main political parties think, and what could happen going forward. The latter part contains a review of the companies in our coverage – some that are UK centric, which give exposure to the note’s wider theme, and others that are focused elsewhere.

Treatt - Return to growth in FY23

Treatt’s FY23 results show a significantly improved y-o-y operating performance, delivering revenue and profit growth alongside record cash generation. Sales in H223 were affected by the destocking of inventory from clients, although management notes early signs of this reversing. Particularly strong growth came from Treatt’s new markets segment (Coffee, China and Treattzest), up 61% y-o-y. Record cash generation resulted in net debt more than halving to £10.4m. Management is focusing on volume

Morning Note – 30 November 2023

Making positive progress on all fronts