Q1: uncertainties impact guidance

The company is adopting a more cautious tone in its FY22 guidance as raw material price increases, supply chain disruptions and overall inflation make the visibility particularly low. This is not new, but the management, which had seemed to expect a normalization of the business in FY22, now expects the current trend to continue. The change in outlook remains, however, rather subtle with an EBIT guided at the low end of the initial range.

Q4: positive end of the year, visiblity remains low

Positive release with FY21 EBIT slightly above guidance (€363m vs €350-360m) and a 4% dividend increase (€1.03 per preference share). While the guidance is subject to the war in Ukraine, FY22 is guided above our estimates with sales of €3-3.3bn and EBIT of €360-390m (AV estimate €2.8bn / €355m), led by both higher volumes and prices, and cost management with a limitation in the hires. FCF is guided at €220m vs €90m in FY21, as working capital improves.

Q3: top end of guidance now looks to be within reach

The EBIT margin declined from 14% in Q1 to 12% this quarter, as rising supply costs and logistics constraints impacted profitability; overall, however, this is well under control and the company is on track to attain the top end of its guidance, if not overshoot this.

Q2: guidance update on price increases

The release mentions that the price increases in base oils will impact costs and margins in H2 and that the high sales of H1 are a result of this. The tone remains optimistic though and, overall, the company continues to handle the surge in prices well, as confirmed by the guidance update.

Q1: raw materials crisis under control for now

Strong earnings with record sales in China but the upcoming increase in raw material prices raises eyebrows, and despite an increase in the guidance for FY21. In our view, Fuchs seems to be managing this crisis well, as such a strong surge in raw material prices could have been much more dramatic.

Q4: margins under pressure in 2021

A mixed bag, with good Q4 results and a dividend increase which were offset by an outlook impacted by inflation-driven cost increases. Q4 EBIT came in above our estimates, thanks to further cost reductions and cash generation which improved with a working capital release of €52m. Management sees pre-crisis sales but an EBIT at 2020 levels, with higher feedstock costs partly offset by cost management.

Q3: sales increase yoy in Asia-Pacific

The results showed a recovery in America and Europe, while the Asia-Pacific region was up 5% yoy. Despite the lower sales, the EBIT was up €2m, with improving margins in Asia-Pacific and America, on the back of savings on functioning costs and thanks to a higher gross margin. The company seems confident in the future, revising its outlook upwards for FY20 and with a couple of acquisitions realised during the quarter.

Q1: earnings to decline a third in H1

The lack of guidance this quarter is not a surprise as Fuchs already struggled to provide a steady outlook when witnessing the slowdown in the automotive market in 2018-19. At the time of the release, management sees a 30% decline in sales in H1 and a 50% drop in EBIT.

Q4: low visibility on COVID-19 free outlook

While the results came in line with the preliminary update, the focal point was on the outlook. Management has not changed its tune and repeated its outlook prepared before COVID-19 became a pandemic. In our view, this reflects once again the lack visibility in Fuchs’ markets, now grappling with an already slow automotive sector and a European lockdown.

Q3: reassuring after H1

The stock has gained 9% the day of the release as a relief after the last quarter. The results show that June was indeed the nadir in weakness. As a reminder, management decided to warn on its results and reduce its guidance in July, even though the market was already improving. We believe the outlook remains foggy, which perhaps explains the cautious guidance upgrade.

Q2: lack of visibility in H2 imposes a cautious stance

The weakening of both China and the automotive market continue to impact Fuchs. Lower sales, associated with the expansion of the group, eroded the EBIT margin, down 19% yoy. The management alluded to July being better than June (which triggered the profit warning). This might spark some hope although the poor visibility calls for prudence.

EBIT to grow +1-5% in 2017

Q1 revenues beat consensus (€618m, +12.4% yoy). The quarter was very good, thanks to organic growth in all regions and particularly in China, Australia and South Africa (Asia-Pacific, Africa +25.1%, of which organic +20.9%). The EBIT (before associates) was in line with expectations, at €89m (+11.3% yoy). The same for net income, at €66m (+12.6% yoy). Outlook 2017: - revenues growth at 4-6%; - EBIT +1-5%.

Outlook 2017: further growth in revenues and earnings

Q4 revenues came in at €564m (+4.4% yoy), bringing the annual growth to 9.0% as announced in January. The EBIT for the quarter was €94m (+15% yoy), also in line with January’s guidance. Outlook 2017: further growth in revenues and earnings, based on a generally positive economic outlook despite the risks in important regions.

Guidance 2016 revised upwards

New guidance 2016: - Growth of revenues at c. 9%, topping the previous +7-8% range after currency effects; - EBIT +8% (vs. +4-6%).

Revenues supported by Europe; guidance for 2016 confirmed

Q3 revenues were €566m (+7% yoy), slightly below consensus estimates. EBIT came in at €93m (+10% yoy), slightly below consensus. Net income was €65m, just marginally below consensus. Guidance 2016 has been confirmed: - growth of revenues at the top end of +7-11% range (“at the top end” is an improvement); +7-8% after currency effects; - EBIT increased to +4-6% (vs. +3-7%); - FCF before acquisition in the upper end of €170-200m range (here also “upper end” is an upgrade).

AUCTUS ON FRIDAY - 26/04/2024

AUCTUS PUBLICATIONS ________________________________________ ADX Energy (ADX AU)C; target price of A$1.00 per share: Important step to unlock Sicily – The Italian ministry has informed ADX that it will be granted the d 363C.R-.AX gas exploration permit in the Sicily Channel. In addition, the Regional Administrative Court of Rome has annulled the Plan for the Sustainable Energy Transition of Eligible Areas that prevented the oil redevelopment, appraisal and exploration activities on the licence.

Mpac Group+ (MPAC, House Stock at 425p) - Further contract in battery manufacturing

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Hybridan Small Cap Feast - 26 April 24

26th April 2024 A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: C4X Discovery Holdings (C4XD.L) has left AIM. What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acqu

LIBERUM: Capex Cycle: Miners' spending continues to lift

Norcros - Sale of Johnson Tiles UK agreed

Norcros’s disposal of Johnson Tiles is the latest strategic activity taken by management to better allocate capital to fit with priorities. Last year it closed its UK adhesives operation. Norcros has a compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. Its rating is low at 6.0x FY24e P/E, which is attractive, especially when compared to its yield of 5.4% on its well

SP Angel Spec Sits: FY Trading Update (LTHM)

Somero Enterprises - FY23 results in line, FY24 may offer upside to cautious out

Somero reported FY23 results in-line with expectations, showing challenges in the North American market, offset by gains from the relaunched S-22EZ availability in H2 and strong growth momentum continuing in Australia. Management cautiously guides to a flat revenue year, which may offer some upside. We make no changes to forecasts, which are pitched conservatively and may offer some upside scope with the launch of new products. We retain our 585p target price which offers significant upside to c

Morning Note – 25 April 2024

ITM Power (ITM LN) - Hygen partnership agreement

ITM has announced a new preferred supplier agreement with Hygen, potentially driving new orders for 200MW of electrolysers for the company going forward.

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

SP Angel Spec Sits: (YUG): FY23A - 50% growth guidance

Despite multiple upgrades, Yu Group has again exceeded our forecasts. FY23A has delivered +65% YoY organic growth and guidance for this year is +50%. Trading arrangements have been optimised in the new year with an agreement with Shell. This releases much working capital back into the business. The dividend has been hiked and management is flagging further potential returns to shareholders. The £100m+ net cash balance is driving the EV/EBITDA valuation down to unsustainable levels. Buy.

Norcros (NXR LN) - Sale of Johnson Tiles UK streamlines the business and improves operating margin

Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028.

The next level – but not a plateau

The recent positive trading statement has provided a short-term catalyst for the shares. In view of management’s target to double sales by 2018 and the strong operational drop-through expected, we still consider the shares to be significantly undervalued. A strong product range, a robust strategy to expand overseas sales and an experienced management team all provide confidence in Somero’s ability to deliver on its strategy. We initiate coverage with a target price of 185p, based on a 2016 P/E t