k+s reported preliminary figures, which suffered severely from the mild winter and lower potash prices. We expected this. To our very reserved 2020 scenario also fits the low level of the new MOP (potassium chloride) contracts in China, which has an impact on the expected recovery of the ASP beyond China. In the light of recent developments, management recently lowered its FY guidance.
It had been clearly stated that the American salt business was in management’s focus and the likelihood for divesting parts of the division clearly rose. Now it has been made official for the sale of the whole division and signing is expected to take place in 2020. We believe, the main trigger for doing so, was the strong need to reduce financial debt. Reported FY figures were mixed, but do not fully match our expectations, especially on net profit.
Having removed the head of IR, k+s’s management has decided to make its communications to the capital markets known through a reputable newspaper. And there was really something to tell: it is striving hard to reduce debt quickly but the current business/pricing environment is unhelpful. It is on management’s agenda and a necessity, which is in their hands, as the operating performance is determined by many other factors (e.g. pricing). It is a sign: k+s is still alive.
We understand k+s manoeuvres in an environment which can be impacted by many triggers, and we see the announcement of maintenance standstills cutting down volumes by another ~200kt as early scheduled stoppages. Compared to the previous year’s drought-related negative effects, this item might have been a bit more foreseeable. The most recent profit warning has not been perfectly managed, in our opinion.
The reported Q3 figures gave a mixed pattern of met and missed expectations, which was true for our expectations as well as those of consensus.
K+S’s Q2 figures were more than solid and it looks to us as if management has made strong efforts to deliver the FY guidance, backed by some better weather conditions. The reported figures were broadly in line with our expectations (profitability was a notch below) and the consensus profitability expectations were missed by nearly -5%. The recent approval of the temporary storage of saline waste water provides additional planning security. Management has narrowed the guided range.
K+S reported a good set of figures, confirming our view. We see the cautious delivery of figures in the adjusted reporting structure as uninstructive. Consensus was outdone here and there.
Sales and profitability were fuelled by higher prices in Q1, whereas the dynamics of the operating unit Europe+ was held back by lower volumes.
2018 turned out well for K+S as there was more rain (higher production volumes) and the sales prices picked up in Q4. This development was stronger than expected by both us and consensus. More interesting is management’s strong guidance for 2019 and the higher payout ratio(!) for the 2018 dividend.
K+S reported a set of figures negatively impacted by the extreme weather conditions in Europe in Q3, especially in Potash and Magnesium Products. The extreme drought in central Europe generated opposite reactions of volumes, prices and (logistic) costs. Due to the latter’s stronger-than-expected impact, profitability came in below our expectations although consensus was broadly met.
K+S has shifted into boost mode, which is not necessarily to be taken in a strictly positive way. K+S’s Q2 top-line did not too bad, but going south the deviation between our expectations as well as consensus and the reported figures increases like opened scissors. Management increased the level of detail in the guidance. We are still wondering why management had not taken the chance to manage expectations when the Bethune issue came up.
K+S announced that Q2 EBITDA was €105.1m (€101.9m) and specified FY EBITDA guidance as seeing the level in the range of €660-740m (previously: significantly up).
The Q2 report will be available on 14/08/18.
The press has reported that K+S’s production at the Bethune site has stood still for four days due to technical issues. Management expects some impact on the Q2 figures, but remains confident of its FY guidance.
K+S reported a nice set of figures, which is in the P&L section but not IFRS compliant. We have undertaken some adjustments in order to generate some IFRS-like figures. Nevertheless, the yoy comparison is not strictly comparable, especially due to the ramp-up of production at the Bethune plant (Canada).
The figures were slightly above our estimates, which might partly be a timing effect, but consensus was not really met on some levels.
K+S released FY17 numbers. Revenues were up 4.9% to €3,627.0m, EBITDA up 11% to €576.7m, EBIT I up 18.1% to €270.8m and net adjusted earnings up 11.1% to €145m. Net debt reached €4,141m (vs €3,538m a year ago and €3,939.2m in Q3). The dividend proposed is €0.35 (vs €0.30). For FY18, the group expects sales to be “tangibly higher” and EBITDA “significantly higher” on the back of rising volumes (Bethune) in the Potash and Magnesium business as well as higher Salt volumes. Note the FY17 net result is burdened by the €43m provision related to the closure of the Sigmundshall potash mine at the end of FY18.
K+S released Q3 17 numbers. Revenues reached €726.5m (+5.7% yoy), EBITDA €76.7m (+37%), EBIT I €12.3m (vs €-31.4m) and net income €1.5m (€-27.4m). Net debt at the end of Q3 17 amounted to €3.939.2m vs €3,745.2m in H1, €3,584m at year-end 2016 and €2,860m a year ago. Over 9 months, revenues reached €2,549.9m (+3.2% yoy), EBITDA €389.5m (-8.3%), EBIT I €178.1m (-11.8%) and net income €115m (-4.4%). The group maintains its FY17 targets (EBITDA to reach €560-660m, EBIT I €260-360m) but, as a reminder, also indicated in H1 that the 2020 target was no longer realistic (EBITDA was seen to reach c. €1.6bn by 2020).
K+S presented its “shaping 2030” plan after having dropped last summer its targets for 2020. In brief, the group’s ambitions are to become FCF positive by 2019, halve its net debt/EBITDA ratio by 2020, work on group synergies (€150m p.a as from 2020), turn investment grade by 2023, reduce its dependence on prices and weather and generate an EBITDA of €3bn and a ROCE above 15%...by 2030.
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Treatt demonstrated its strength and resilience in H120, as so far the COVID-19 pandemic has not had any adverse impact on trading performance. Of course, this is in part due to the categories in which Treatt operates, with some of its products being used in household cleaners, which have witnessed a global spike in demand. Nevertheless, the steady performance is testament to the management and culture of the business, which have been able to withstand the unexpected and exogenous shock. H219 and H120 were affected by a global weakness in citrus raw material prices, which in turn affected revenue growth. Citrus prices have now started to firm and we expect growth in this category to return in H2. We leave our forecasts mostly unchanged but roll forward our DCF and hence our fair value rises to 560p (from 530p previously).
COVID-19 update – continuing to operate, div. suspended
Companies: Scapa Group
Companies: AVO AGY ARBB ARIX BUR CMH CLIG DNL GDR HAYD PCA PIN PHP RE/ RECI RMDL STX SHED VTA
Byotrol provided a positive trading update for the year ending 31 March, with (i) revenues in line with expectations at £6.0m, (ii) a positive adjusted EBITDA of c.£0.25m, which excluded a material but delayed licence contract that was closed in mid-April and (iii) cash at 31 March of £1.7m (ex-£0.3m that slipped into April). Despite the supply chain challenges that country lockdowns have had to fulfilling the order book, which stood at a record £2m at the year-end, Byotrol expects to generate record product sales in the first quarter of the year. Whilst we are not introducing FY 2021 forecasts at present, we raise our target price to 9p to reflect the enhanced outlook and prospect for growth. At 9p, the EV is £37m. A 4.0x EV/Sales would imply revenues of c.£9m, which given the outlook and fundamental shift that we are seeing in disinfection, is achievable in our opinion.
There has been much comment on the fact that equity markets in the US and Europe have been shrinking for some years now, certainly in terms of the number of quoted companies, if not in total market capitalisation (MCap). This paper has been written with the assistance of the Quoted Companies Alliance (QCA) and focuses on the evidence for such in the London market and, in particular, that for smaller and midcap companies. It assesses that evidence and considers explanations. Finally, we ask why it matters, and assuming that it does, what practical steps can be taken to reverse the trend. Successful public markets have been a key part of the United Kingdom’s economic success for generations, even centuries, and we should not allow them to wither on the vine.
Companies: AVO AGY ARBB ARIX ASAI DNL GDR HAYD NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE TRX TON SHED VTA
Covestro’s management gave some further insights on Q2 developments during its virtual sellside round table. Having gone 2/3rds through the second quarter, management indicated some recovery was to be seen in its core volumes in June having looked into the order book.
Management’s recovery scenario is based on getting back to the pre-crisis GDP level in 2023, which is rather more moderate than our picture but does not force us to take immediate action.
When is a bubble not a bubble but a fundamental and lasting shift in investor sentiment towards a sector? Despite repeated calls from the biotech bear camp that the end is in sight for the continued optimism enjoyed by the sector we continue to enjoy a burst of IPOs, fundraisings and M&A deals.
Companies: EDEN MTFB TILS SDI GDR IMM BMK AVO AVCT
Interim results to 30 September pointed to a substantial narrowing of EBITDA losses and provided comfort that the company is on track to deliver a positive full year EBITDA. The company is in early discussions with parties in the US to replace Byotrol24’s in-store Target trial with one in which it is not funding the up-front marketing costs. Additionally, it is working on a number of monetisation opportunities that should contribute to H2. We make no changes to forecasts and reiterate our price target of 7p, mindful of the value of its IP and the fact that the business is expected to be cashflow-positive in FY 2020.
The announcement of renegotiated contingent payments to the vendors of Medimark Scientific is seen very positively as it enables the integration of the two businesses to begin immediately, rather than waiting until April. We expect the integration to generate both cost synergies as well as revenue synergies as the established salesforce at Medimark cross-sells some of the Byotrol product range. A final payment of c.£290k will be paid, in addition to the issuance of 9.36m shares, comparing favourably with our forecasts that assumed a £450k payment and issue of c.11m shares. We make only modest changes to forecasts and reiterate our target price of 7p.
US & German manufacturing PMI hits lowest readings since 2009, UK manufacturing PMI heads below 50, BorgWarner expects material financial impact from customer production halts
Companies: AVON CGS HAYD HEAD HILS JHD RNO SCPA TWD TRI ZTF SOM GHH
COVID-19 Trading Update
Companies: Haydale Graphene Industries
Against a backdrop of generally negative company announcements, Hardide bucked the trend by releasing solid interim results for the 6 months ended March 2020, noting limited impact to date from COVID-19 and a positive trading outlook. Furthermore, the allimportant move to new facilities and corresponding capacity expansion is both on track and on budget. Several of Hardide’s end markets will clearly be feeling the impact of COVID-19. However, we feel the importance of Hardide’s technology to its customers by extending the useful life of components and its diversity of end markets across multiple sectors including oil & gas, aerospace, flow control, power generation and precision engineering is enabling it to weather the storm. We leave our forecasts unchanged and see potential for an upgrade should end markets maintain strength and H2 margins match those of H1.