Without MSC our forecasts would have been cut

HHLA’s Q3 23 results fell short of expectations and the group revised upwards its capital expenditure guidance. The de facto question is whether the investment plan is running ahead of schedule or inflation is hitting hard. At the end of the day, this reinforces our recommendation to accept MSC’s tender offer for HHLA’s floating shares at €16.75 (the tender period closes on 20 November).

Q2 23: A weaker economic outlook leads to lower forecasts

HHLA slashed its FY23 guidance on weaker volumes and the economic outlook. Our forecasts will be reduced to align with this new outlook. However, given the persistent weakness in the share price since the beginning of the year, in our view these results have somewhat confirmed investors’ fears, thus limiting the post-release negative sentiment. Overall, these implied lower cash generation expectations, coupled with rising interest rates, are becoming increasingly worrying in terms of HHLA’s abil

Investments in focus at HHLA

HHLA posted a weak start to FY23, missing consensus expectations on profitability and the bottom line. The guidance was confirmed, with hopes low-balled by a consensus standing at the very bottom-end of the company’s targets. Beyond the risky recessionary environment and questionable recovery in Chinese demand, in our view there is some concern amongst investors about the viability of the front-loaded mid-term investment plan. Nevertheless, we see the negative Q1 FCF to be temporary as capex sho

Volumes and storage fees have peaked, investment hasn't

HHLA’s Q3 22 figures came in slightly above estimates. As shipping rates plummeted during the Q3 on lower demand, this translated into plunging volume throughput. This has yet to materialise in HHLA’s top line which remains protected by record-high storage fees. The margin has however already pivoted since its has been squeezed by increasing cost inflation pressure. FY22 guidance adjustments saw trimmed expectations for container throughput and capex, increased revenue forecasts and confirmed EB

Downward trending container throughput remains the base case scenario for H2

HHLA posted Q2 results in line with expectations factoring in a continuously high storage-fees-driven profitability, and no contribution from the deserted port of Odessa. The port of Tallin’s (last stop before Russia) strength partly compensated for the missing Odessa while sea freight saw a sequential worsening in bottlenecks. The guidance was thus slightly amended on container throughput volumes for the year without harming the remaining targets for FY22. Negotiations on wages continue without

Mixed Q1 results show first hints of deceleration

HHLA reported a new quarter of excellent results in the container segment, with a lasting profit booster from the sea freight traffic jams. This largely compensated for the closure of CTO and the inflation of energy prices in the rail and road transport activities. FY22 guidance was confirmed (without any contribution from CTO) anticipating a normalisation of container freight in H2 22. With prices on the China-Europe route already downward trending, this looks achievable.

Loaded Hamburg, empty Odessa

HHLA release impressive FY21 results as the profitability boost from high storage fees continued in Q4. The freshly released FY22 EBIT outlook met consensus expectations in the midpoint with an assessment of the impacts from the Russian-Ukrainian conflict. These targets exclude any impact from HHLA’s container terminal in Odessa (Ukraine), still this is fair to assume that write downs are likely on the €47m equity value of CTO.

Profitability in autopilot

HHLA has released an ambitious but costly plan to build-back its market share while elevating margins to historical highs by 2025. The core of the plan will be the automation of Hamburg’s terminals together with sharp organic growth in the Intermodal activities. While this was much needed and expected, the magnitude of both the investments and their returns came in above our latest estimations. At the end of the day, we expect the trade-off to be positive on the stock.

Q3 21: at least a beneficiary of the maritime mess

The Q3 21 results were margin-driven with an impressive 12% jump in ASP in the Container segment as longer dwell times drove a spike in storage fees, largely offsetting the higher expenses. This contributed to beating consensus on the bottom line despite lower-than-expected volumes. The 11% Q4 21 implicit EBIT margin might look a bit conservative after 13.5% in Q3 21 and given the still ongoing supply-chain constraints.

Intermodal transport saves the boat

HHLA reported a resilient performance in Q3 20, posting quarterly revenue of €331m (-5.6% yoy) vs. the 9.4% drop in H1 20 and a strong EBIT margin recovery (15.6% in Q3 20 vs 8.6% in H1 20). The FY20 outlook is maintained while not ruling out a continuation of the recovery in Q4 per se.

Blank sailings, a double-edged sword

HHLA posted declining H1 20 revenue (-9.4% yoy) driven by its container and intermodal divisions (-9.6% yoy and -8.5% yoy, respectively). The container division’s volume was dragged down by increased blank sailings, which, in turn, increased storage times and fees (increasing the division’s ASP). This volume contraction translated into a 74.2% yoy drop in profitability and lower FCF (-34.1% yoy). As for the outlook, the company expects, for FY20, to suffer from a strong reduction in volumes, re

2019 was a good year, but 2020 will be considerably weaker

HHLA’s 2019 numbers were pretty much in line with our expectations, but management gives a bleak outlook for the current year as a result of COVID-19 (see our chat from 20 March). Because of this negative outlook, management proposes to cut the dividend from €0.80 paid for 2018 to €0.70, although operating earnings increased while net earnings were only marginally down. The justification given: maintain liquidity.

Superb 9M profit numbers, except for net profit

IFRS 16 had a material impact on HHLA’s earnings, i.e. EBITDA and EBIT were sharply up and stronger than the consensus had expected, but the bottom line is only marginally higher.

Superb H1 19 numbers

Rising container volumes combined with higher ASPs have resulted in strong revenue and profit growth. Container (i.e. the handling of TEUs at the ports) increased volume by 3.8% to 3.77m and the ASP by 1.7% to more than €106. Intermodal’s volume of land-transported TEUs was up by 9.6% to 782k and its ASP increased by 7% to €312. These numbers were not only higher than ours but also higher than the highest consensus numbers.

Some volume growth plus sharply higher prices

The Port of Hamburg continues to suffer from the limited depth of the River Elbe. As a result of this and as shipping companies have changed some of their routes, the number of containers handled by HHLA in Hamburg fell by 1.3%. The need to finalise the deepening of the river is becoming more and more pressing. However, this was compensated by rising volumes outside of Hamburg.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Morning Note – 16 April 2024

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

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.

PROGRESSIVE: Severfield: Step change in European and Indian outlook

Severfield’s full-year results to March will be ‘slightly above’ the Board’s expectations, according to today’s trading update, with net debt significantly better. We maintain our PBT estimates for both forecast years, which are ahead of consensus, but reduce our net debt for FY24E. Record orders were boosted by the steel specialist’s European operations, after last year’s Voortman acquisition, while the Indian JV has seen ‘another step up in profitability’. The group has also launched its first

Clean and competitive fertiliser