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Nice beat in profitability due to a sharp increase in Pasta margin While Rice suffered some price adjustments, in line with cost evolution, Pasta recovered part of the lost volumes in recent quarters which together with lower energy cost and better productivity showed a 650 bp improvement in EBITDA margin. This implies 170 pb improvement for the whole company or a beat, on absolute EBITDA, of 4% vs consensus. Cash generation improves Working capital stabilised vs the reduction seen in 2023, and despite EUR34m capex in the quarter, FCF generation exceeded EUR63m, more than on track to reach the EUR162m we expect for the whole year. Outlook improves as well While there has been negative impact from the drought in Spain during Q1, recent rains will help sowing for next harvest. Additionally Ebro will finish its big investment plan during this year, which should help FCF in H2 and 2025. Additionally the company has announced a EUR30m disposal in real estate during the year, which could also drive a special dividend. We reiterate our Outperform Results are solid with a good improvement in profitability, above expectations. Additionally, the better operating performance is translating into FCF generation. Despite slight recent outperformance we think that given the excellent result trends the stock is trading at very attractive multiples (7x EV/EBITDA).
Ebro Foods Ebro Foods SA
Q4: a balance of positive and negative surprises Positive surprises came from Logista, Ebro and Rovi; others were more in line, such as Merlin and Vidrala. On the negative side were some of the usual suspects: Almirall, Prosegur and Tecnicas. Grenergy also joined this group for Q4. Overall results were impacted by some deceleration in sales (with tougher comps on volumes) as well as the end of margin expansion, from a peak in Q3. Cautious (or conservative) guidance for 2024 In their 2024 outlooks, companies are factoring in the uncertainties regarding how deflation will impact margins and if volumes, especially for those suffering from de-stocking, will recover or if demand will continue to be weak. We have therefore already reduced our EPS estimates by c. 3% on an aggregated basis for 2024 and 2025, but not entirely due to lower sales or EBITDA. We are slightly above consensus on EBITDA (2% average) with a more constructive view than consensus on Merlin, Grenergy and Prosegur Cash. Spanish mid-cap performance Spanish mid-caps are flat from the beginning of the year compared to an 8% absolute outperformance in the last 6 months. Spanish mid-caps trade at a huge discount not only vs the last 15-year average (40% discount on P/E) but also vs European mid-caps (36% discount vs 10% historical). We remain positive overall, with Outperform ratings on 50% of our coverage. Our Top Picks still working Our Top Picks list continues to outperform the main indexes after opting for more defensive names in January (including Ebro and excluding Gestamp). Our Top Picks have seen an average 5% absolute return since January, or 200bp above the Spanish MSCI Mid Caps Index. Rovi was the best performer (+20%), with Vidrala at 4%. Our four Top Picks are unchanged: Rovi, Merlin, Vidrala and Ebro Foods. We today updated our investment case on Rovi (see link).
EBRO EBRO VIS VIS PSG PSG MEL MEL CAF CAF VID VID TRE TRE COL COL FDR FDR ALM ALM ROVI ROVI MRL MRL CIE CIE LOG LOG GEST CASH GRE GRE
10% EBITDA beat thanks to Pasta Q4 numbers came 10% above consensus and at the higher end of the guidance thanks to stronger contribution from the Pasta business. Rice performed in line with expectation with 3% EBITDA growth and a 38bp improvement in margin as a result of lower cost of inventories. Pasta was the surprise with a better mix and lower raw material prices leading to a 16.5% EBITDA margin in Q4. Deleveraging above expectations Ebro has started to reduce the high level of inventories, with a positive working capital impact in FCF of EUR160m in the year. Additionally, the company has factored in EUR15m of real estate disposals and another EUR30m is expected in H1 24. This has significantly reduced net debt by EUR190m to 1.5x ND/EBITDA. The company has increased dividends this year by 10% and does not rule out a higher remuneration if there is no MandA (the CEO reiterated that current opportunities are at very expensive multiples). Calm year ahead The company has not communicated many details on 2024, guiding to a more stable year with slight increases in EBITDA, though this is very dependent on harvest and commodity prices. FY24 will be the last year of high capex; while working capital is still high compared to historical levels a material reduction is not expected. We slightly adjust our estimates. Outperform reiterated We slightly increase our EBITDA 2024e on better Pasta numbers. EPS is revised 3%/4% downwards on higher minorities (Garofalo, among others). Our TP is unchanged at EUR20. We maintain our Outperform rating based on the solid results, the strong deleveraging and attractive valuation.
We upgrade Ebro to Outperform after a long-held cautious view on the name. The upgrade is premised on three main factors: 1) an improving commodity market which should support gross margin expansion; 2) potential for further deleveraging through lower stock and a reduction in expansion capex; and 3) undemanding valuation. Our TP is raised to EUR20 (from EUR18). Current deflationary environment supportive to gross margin While draught is always a risk to rice prices, the current general cost deflation, including transportation, should eventually support lower commodity prices and Ebro''s gross margin. In addition, the recent shift of Ebro''s business towards less pasta exposure has improved the group''s procurement costs. We expect a gross margin improvement, albeit marginal from the current trough. Potential for further deleveraging through better working capital and lower expansion capex After three years of substantial restocking, which helped Ebro protect margins better than its competitors, we expect stock days to fall to 91 vs. peak of 112 (still far from the 72 achieved before Covid). This should drive a EUR100m reduction in working capital in 2023. With the large capex expansion projects behind us by end 2024, we expect capex/sales to reduce to 4% from c.5%. This should help the company develerage from 1.6x ND/EBITDA in 2022 to 1x in 2024e. Valuation appealing again - we raise our rating to Outperform With earnings momentum improving on lower commodity prices and the recent stock de-rating, we believe now is the time to start building position in Ebro. The shares are trading at a 30% discount vs. staples and at a 20% discount to its 10-year EV/EBIT. We raise our 2024/25e EPS by 1%/4% respectively on better gross margin. Our DCF-based target price increases to EUR20 (from EUR18) and implies 12x EV/EBIT 2024e, 15% below its 10-year historical average. We add Ebro to our Top Picks - see SPANISH MID CAPS: Picking defensives.
Feedback from Spain Investors Days Last week, 44 companies attended our Spain Investors Days (held during 10-11 Jan). While there was no consensual message, we identified some uncertainty on volumes and prices for the year, which we believe the interest rate pivot in H1 could solve, driving positive momentum into H2. The most coveted names were Real Estate stocks, CIE Automotive and Vidrala, while the most positive messages came from Vidrala, Merlin, and Rovi. Several rating / estimate changes since the beginning of the year In this report we cut estimates for Gestamp (raw material prices and worse mix) and Viscofan (lower volumes) but maintain our Outperform rating on both names. We raise long-term estimates for ROVI (better CMO business). In a separate report, we upgrade EBRO Foods to Outperform on strong deleveraging potential and lower commodity prices. In this note, we downgrade GreenVolt to Neutral due to the lack of upside after the KKR bid. Earlier this week, we downgraded Colonial to Underperform and upgraded Melia to Neutral (See report). We expect more negative than positive surprises from the Q4 reporting season On Q4 numbers, we are more bearish than consensus as we believe the impact of Argentina (mainly impacting Prosegur and Prosegur Cash) hasn''t been reflected yet. There are other names like Viscofan where we expect more (volume related) negative impact than expected. Regarding 2024 guidance, we are more optimistic on Vidrala and Merlin and cautious on Fluidra and Colonial. Turning more defensive after a great year: adding Ebro / removing Gestamp and Greenvolt Our model portfolio outperformed European Mid Caps MSCI by 24ppts (+23% absolute) in 2023. For 2024, we keep three names in our portfolio: Merlin, Rovi and Vidrala. We remove Gestamp and GreenVolt and add Ebro Foods as we move towards a more defensive strategy.
EBRO EBRO VIS VIS PSG PSG MEL MEL CAF CAF VID VID TRE TRE COL COL ALM ALM ROVI ROVI MRL MRL CIE CIE LOG LOG GEST CASH VRLA GRE GRE GVOLT
Mid caps CEO conference: Rovi, Merlin and Verallia the most significant comments We hosted our 6th CEO Mid Caps conference seminar in Paris, where more than 100 Mid Cap companies met with more than 270 investors. Among the nine companies that we cover, we highlight the positive messages of Rovi (increasing vaccine manufacturing expectations thanks to US business and with positive guidance for gross margin in coming quarters), Verallia (more resilient 2024 than consensus expects with volume growth and positive price spread) and Merlin Properties (benefiting from inflation and all-time high occupancy levels). Q3 23 results: Weakness due to destocking and a cautious stance An overall weaker than expected quarter had 2 main themes: destocking is still impacting companies like Viscofan, Vidrala, Ebro and Fluidra, and caution on 2024 (with limited visibility in most of the industries). We highlighted the positive figures of Rovi (upgraded FY23) and Merlin (we think will upgrade guidance) while Viscofan (warning on destocking), Fluidra (weaker volumes continue) and Melia (impacted by high interest costs) disappointed. We maintain our 5 top picks: Greenvolt, Gestamp, Merlin, Rovi and Vidrala We expect Greenvolt to capitalize on the acceleration of its asset rotation strategy (which already started in July with a disposal of 50MW in Poland) and Merlin Properties to continue delivering strong results in H2. Rovi''s new US growth driver and the strong improvement in gross margin should drive consensus up for FY23 and FY24. Despite the debate on glass packaging, with lower volumes and pricing pressure, Vidrala was able to maintain FY23 guidance and we expect 2024 to be a better year than consensus expects with volume growth and positive price / cost spread. Finally, Gestamp could be a controversial call after a weak Q3. We still have a positive scenario for production in 2024 and we expect outperformance to continue, driven by higher outsourcing and EV...
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Ebro Foods made a significant impression with its 9-month results. The company’s recent investments are starting to pay off. In general, inflation costs are starting to decrease, positively affecting margins. Besides the very strong 9M 2023 figures reported by the company, *we are even more encourged by the company’s announcement regarding the development of its value-added strategy.
Better numbers, especially in Pasta Despite the volatile scenario in terms of raw materials and the harvest, Ebro beat consensus estimates, with stronger numbers in Pasta. In the Pasta division, despite the weaker volumes in France and tough comparison, the lower durum wheat prices and better mix allowed EBITDA margin to rise above 14%. For rice on the contrary, heat waves during summer negatively impacted the European harvest, which also impacted EBITDA margin. De-stocking has started, while Capex will remain high The company has started the process of reducing stocks after two years of higher than usual levels. In Q3 the company reduced working capital by EUR135m, and this process could continue for at least two more quarters. With some delays in the capex plan, the company expects Capex for 2023 and 2024 to be c.EUR140m, mainly driven by capacity increase for value added products. FY23 guidance slightly above consensus As with every 9M publication, Ebro has guided for its FY23 EBITDA. EBRO expects EBITDA to be between EUR372m-EUR378m, which is 2% above consensus before publication. We adjust our figures on higher margins for Pasta, keeping cautious growth for 2024 given the uncertain scenario in volumes and pressure from food retailers. We upgrade our TP to EUR18 (from EUR17.5).
Good Q2 results and FY23 upgrades have helped Spanish Mid Caps to outperform Spanish SMCs are 8% up YTD and 7PP above European SMCs. The good Q2, with an absence of big negative surprises, has led many companies to post positive messages for H2 (e.g., Merlin, Colonial, Rovi, Logista). But this was not unanimous: Fluidra and Viscofan narrowed their guidance toward the lower end of the range while Prosegur and CASH will be impacted by ARS depreciation. Disinflation: key driver or threat? While inflation seriously impacted several companies in 2022, we think that the disinflationary wave ahead will have less impact. We anticipate a strong positive impact at Gestamp (lower steel costs combined with strong demand momentum) and glass packaging (stronger pricing power than expected, with a positive energy cost tailwind). Melia and Prosegur could suffer. We have set out our ESG Approach We recently published our Spanish Mid Caps ESG report (ESG: Verde que te quiero verde), identifying opportunities for ESG funds to increase their stakes in Grenergy, Viscofan and Verallia and to maintain positions in Fluidra, Merlin and Voltalia. We downgrade CAF to Neutral on margin concerns and after strong recent performance We are cautious on the evolution of margin given the poor execution of the recent months. This, together with the recent strong performance, leads us to lower our rating to Neutral. Our top picks: Merlin Properties and Greenvolt in, Viscofan out Our top picks have enjoyed over 12PP outperformance relative to the European benchmark YTD, thanks to the takeover of Applus and the recovery of Rovi. We choose our top picks principally on short-term momentum: we add GreenVolt (on acceleration of asset rotation) and Merlin (likely to beat guidance) while keeping Rovi (strong H2), Gestamp (enjoying excellent production growth) and Vidrala (with strong tailwinds). We remove Viscofan on weaker earnings momentum than the abovementioned names, but with an...
EBRO EBRO VIS VIS PSG PSG MEL MEL CAF CAF VID VID TRE TRE COL COL FDR FDR ALM ALM ROVI ROVI MRL MRL CIE CIE VLTSA VLTSA LOG LOG GEST CASH VRLA GRE GRE GVOLT
We have opted for a pragmatic approach on ESG for our Spanish Mid Caps, given the heterogeneity of the sector. We analyse several parameters for each company, and we pick out stocks which we think should be owned by ESG funds (some of which are already widely owned and some which are not) and the stocks to avoid from an ESG perspective. Spanish Mid Caps are not well represented within ESG funds This is not only due to their low liquidity, but also in comparison to other countries. Only 2% of our coverage''s free float is ESG fund owned, less than for Italy or Germany, albeit in line with France. Good rating and owned by ESG funds: REITs, Fluidra and... Voltalia Real Estate names (Colonial and Merlin), Fluidra (focus on water) and Voltalia are well owned and have good ESG ratings, despite weakness on Governance, in our opinion. ESG strength but not owned: Verallia, Grenergy and Viscofan There are some companies for which we believe that the ESG positioning is positive and deserves a better holding at ESG funds. These are: 1) Verallia (excellent ''S'' and ''G'' and improving on the ''E'') and 2) Grenergy, for the same reasons as Voltalia. We think the consensus ESG rating for Viscofan is distorted by what we believe to be an unreasonably low environmental rating. Were one to apply a rating we think is fair, greater ownership among ESG funds ought to follow. Stocks with good ESG rating but not owned for a reason: Logista and Tecnicas The exposure to tobacco in the case of Logista and to Oil and Gas at Tecnicas are the obstacles for ESG funds to own these stocks, despite their good overall rating. Owned but which we believe should be avoided: Prosegur Given the complex Governance structure (family controlled with less than 50% independent board members) and the pushback on the social (S) part of the ESG rating (given the nature of its business), we think that there is no strong reason for ESG funds to hold close to 5% of the free float.
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Ebro Foods posted a strong H1, primarily led by the rice division. The implementation of its value-added products strategy is well underway and is expected to have a greater impact on upcoming results. These H1 results once again confirmed that the company is a natural hedge against the decline in consumer purchasing power.
Positive quarter, mainly due to Pasta While volumes have been slightly weaker overall - with a particular impact in high value added products - the pricing policy and the improvement of the cost environment have helped Ebro to beat expectations, especially in Pasta. Durum wheat has come down significantly and despite other products (eggs, dairy and potatoes) still showing inflation, EBITDA margin in Pasta has increased more than 6PP from a very depressed Q2 22. Volume normalisation on the cards, albeit with some volatility The company expects volumes to normalise. However, the raw material scenario is far from being stable. Lack of rain in Spain will impact the Spanish rice harvest while heavy rains in Italy and California will have the opposite effect. The recent export ban in India favours the company, which is still over-stocked, but the bad quality of Canadian durum could have a negative effect on pricing. We slightly upgrade our numbers We upgrade our numbers, especially for Pasta, to a more normalised EBITDA margin than in the past. We upgrade our EPS23 by 6% and EPS24 by 5%. We increase our TP by 3% to EUR17.5 (from EUR17). This increase is lower than for the EPS as a result of lower WC reduction than initially expected due to the current volatility in raw materials. Neutral rating reiterated.
In the Q1-2023, Ebro Foods once again demonstrated its resilience in the face of the current macroeconomic environment. The company’s topline was largely bolstered by its rice business, which has proven resistant to the challenges of drought and flooding. Despite a somewhat tempered outlook, Ebro remains confident in its ability to deliver a robust year.
Good figures in rice Ebro figures came ahead of consensus numbers, with a 6% beat on sales. The Rice business continues to benefit from price increases, keeping market share on behalf of secondary brands and despite strong gains in private label. Pasta has recovered some lost volumes in fresh pasta product but suffers from tough competition in Italy among premium players. Beat at EBITDA The good procurement in the coming months together with a lower cost of fleets from Asia has helped to moderate the impact of raw material prices in rice (with Basmati up 80% and Japonic up 60%). In Pasta, and despite some decline in durum wheat prices, other raw materials have increased. EBITDA grew 11%, 9 pp above consensus, while margin declined 10 bp. We still need to be cautious Even though results came above expectations (and we were above consensus), the current environment is far from being easy. The current drought season in Southern Europe and LatAm and the higher cost of Indian Basmati will likely continue the rest of the year. Ebro has done a great job stockpiling raw materials ahead of price increases but they will need to replace existing stocks by the end of the year. In terms of volumes, higher consumption outside the home could also put some pressure on volumes. We maintain estimates and rating We expect a positive reaction post results and probably some consensus upgrades. We maintain our estimates as we are 4% above 2023 consensus EBITDA. We see the stock at fair value at this price.
Better than expected, no doubt Q4 results for Spanish Mid Caps were better than expected, with 40% of the companies beating expectations and only Prosegur posting weaker figures. We highlight the strong performance of Vidrala, Rovi and Gestamp, among others. However, companies'' outlook for 2023 has been more cautious. With the exception of Vidrala (EBITDA margin above 25%) or Gestamp (double digit growth in sales and EBITDA), the other companies have preferred to keep a cautious stance. Resilient demand and margins bottoming out Trends seen in previous quarters have continued with volumes quite resilient and not impacted by the inflationary environment. Prices have increased again, with margins bottoming out as previous years'' quarters were already impacted by inflation. After updating our estimates (no changes have been done in this report but in prior postview notes), we highlight Vidrala (+19% versus FY23 consensus EBITDA) as a result of the recent evolution of energy costs. On the contrary, we are below consensus in Fluidra (-4%) and Tecnicas Reunidas (-4%). Spanish midcaps beating European peers Spanish midcaps have performed better than European peers YTD (+3% relative to Europe SandM Caps MSCI, +12% in absolute terms), with our selection of top picks also outperforming. All stocks are up YTD, and we would highlight Gestamp (+19%), Rovi (+13%), Applus (+10%) and Vidrala (+17%, added to our top picks list on January 23rd). We maintain our 5 top picks Despite the positive share price performance of some of them, the good results allowed us to lift estimates and target prices for some (Vidrala, Gestamp, Viscofan), while the valuation argument is still valid for others (ROVI and Applus).
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Ebro did slightly better than the guidance given three months ago. The year was clearly driven by the first half, the third and fourth quarters having encountered many challenges which are expected to continue in FY23. Despite this, it can be said that Ebro does not feel too bad about the situation.
Strong numbers in Rice Ebro reported good figures, beating consensus estimates by 11% in sales and 19% in EBITDA thanks to the excellent performance in the rice division. Rice business grew 33% in Q4 thanks to strong pricing while EBITDA margin improved 240 bp despite raw material prices thanks to a successful procurement strategy. Pasta, on the contrary, underperformed, impacted by lower volumes (due to higher demand elasticity) and raw material headwinds. Net Profit came below expectations due to some impairments. But a challenging environment ahead 2023 will be far from being a calmer year. Labour cost inflation, drought season in Europe that should impact this year harvest, high basmati prices and the difficulty to make a proper passing through (they estimate EUR225m of extra cost for the year), will make 2023 another challenging year. The company has increased significantly its level of stocks (working capital increased by EUR229m in FY22), but it could not be enough to offset a possible scarcity. We adjust our figures We increase our FY23 EBITDA by 3.9% on better 2022 rice figures. We revised downwards our EPS by 3% and 2% for 2023 and 2024 respectively on higher financial costs and minorities. We increase our TP to EUR17/s vs EUR16.5/s. Too much uncertainty with limited valuation appeal While results have been better and the company demonstrated its ability to navigate the turbulent environment, especially in rice, the current situation could add more volatility to prices and margins. In any case, and despite increasing our EBITDA figures, we think that the company is not cheap for its growth profile, trading at 15x FY23 PE. Reiterate Neutral.
After a year where Spanish Mid Caps outperformed Europe (+10%) and our top picks beat the European index by 14%, we expect the current improvement in the macro conditions to help Spanish names rerate. We include Vidrala in our top picks, given strong momentum and attractive valuation, and we remove Prosegur Cash, but remain O/P on the stock. We maintain Applus, Viscofan, Gestamp and Rovi in our preferred list. Better macro environment, lower energy prices... and a better mood at the companies Our Spain Investors Day saw a more bullish message from companies than initially expected, with no fear on consumption, fewer supply chain stresses and a better energy scenario. This is also seen in the recent macro data which indicates the risk of recession has reduced, with more appetite for cyclical names in the market. We are more bullish than consensus Despite the more positive comments from companies, which bode well for operating results, we reduce EPS estimates for some companies to reflect higher interest charges and a worse currency scenario. However, we are still more than 3% above aggregated consensus for EBITDA23. We would also highlight that we are 20% above for Vidrala (having included the new energy scenario) and c.7% for all of: Gestamp (higher operating leverage vs consensus), Logista (tobacco prices in Spain) and Tecnicas (better margin, although below guidance). Top Picks: APPLUS, GESTAMP, ROVI, VIDRALA and VISCOFAN We add Vidrala to our top picks (replacing Prosegur Cash, though we remain Outperform on it), where we see strong momentum, helped by not only price increases but much better energy costs, not reflected yet in consensus (we are 25% above EBITDA23). We keep Applus (disposals are expected while growth is accelerating), GESTAMP (excellent production year with strong outperformance thanks to outsourcing and EV exposure), ROVI (highly penalised with strong catalyst in H2) and VISCOFAN (defensive call with high volume growth and...
We take the temperature of the coming quarters after deciphering 3Q results and our recent CEO MidCaps conference. We see some difference in operating performance, with some companies still suffering from supply chain restrictions, destocking and margin contraction while others enjoy healthy pricing power, volume growth and improving cost efficiency. In this context, we stick to our top picks list: Applus, Gestamp, Prosegur Cash, Rovi and Viscofan. 5th Midcaps CEO Conference: A more positive bias than initially expected We hosted the 5th CEO Midcaps Conference in Paris last week, with more than 100 companies and more than 200 investors meeting together. From our coverage, we hosted Applus, CAF, Fluidra, Gestamp, GreenVolt, Logista, Prosegur Cash and Rovi. Overall, we saw more optimism than the macro indicates, despite some activity slowdown and investors now focusing on labour cost inflation, supply chain debottlenecking, capital rotation to fight interest rates rise and liquidity. Q3 results: More disappointments than usual Although there were some disappointments, overall figures during Q3 held up better than expected. Top-line growth continues to trend well, not only helped by strong pricing but with more resilient volumes than estimated. However, margins went down, mainly as a result of higher costs not fully compensated by higher prices, but LTM EBITDA continues to grow at 7%. Prosegur Cash and Vidrala surprised positively, mainly on margins, while on the not-so-bright side, Almirall, CAF and Fluidra were the main disappointments during the quarter. Slightly more positive than consensus for 2023: We stick to our top picks list Relative to 2023 Consensus, we are c.3% ahead on EBITDA. We are above consensus on Vidrala after the recent update, Gestamp on accelerating production and Prosegur on volumes. Our top picks saw +1.9% performance over the last 6 months (vs -11% for Spanish MSCI Small Caps). The list is a combination of...
Ebro had held up well up to this point but we were not that surprised to see a relatively poor Q3. The group is facing a lot of pressures that are likely to continue in the coming months.
The scenario has not improved The scenario has not changed vs H1, with high inflation in energy, raw material and transport costs. Additionally, USD strength does not favour exports, and labour cost is still a tricky issue, due to high staff rotation. Demand has smoothed a bit, due to the end of stockpiling in previous months and due to higher prices. There is also a trading-down effect towards private label which is eroding market share in some regions (albeit not too much yet) Ebro was able to offset in rice, not so in pasta In rice, the supply-in-advance policy has helped and the company has protected inventory positions until Q2 23 at better pricing than the market. This allowed sales in rice to continue growing above expectations in Q3, and EBITDA was 2% above consensus (despite lower margin). In pasta the elasticity of demand to price increases is higher, which mainly impacted fresh pasta. Pasta EBITDA declined 22% in Q3 and margin more than 300 bp, despite a preferential energy agreement ending in Q4. The future looks blurred For 2023 there is major uncertainty not only on what competition with private labels will be like, but also the risk of the low harvest due to weather: -20% lower harvest in japonica rice (impacting Italy, Spain and California) but also higher prices in basmati due to floods in Pakistan. With higher energy costs, and the high staff rotation, the company does not expect a good 2023. We maintain our estimates unchanged Our scenario already reflects this tough environment. We slightly increase our sales but keep EBITDA unchanged. We are 3% below consensus for EBITDA 23. Our TP is revised to EUR16.5 (from 17) due to higher working capital in order to maintain COGS stable at least for the first 4 months of 2023. We maintain our Neutral rating.
Easy comps have driven up the H1 results, but the environment remains tight and Ebro expects lower H2 demand which should in the end not help the rest of the year.
A strong performance in Q1 (better-than-expected) is welcomed given the more cautious tone of the company for the following months.
9m FY21 figures were obviously down vs. FY20 (strong negative comps), but they were still remarkable compared with FY19. We expected very complicated management of inflation for the group, but we see a rather good surprise on that side. On the other hand, we should be more cautious about 2022, when the current hedging will roll off.
Unsurprisingly, we see a decrease in the results compared to 2020, but still good progress compared to 2019, which confirms the good trajectory of the group.
With no surprise, Q1 FY21 top and bottom lines declined due to tough comps. The momentum remains, however, strong looking at CAGR 21/19, but input cost inflation is now the main threat looking forward.
Unsurprising very strong FY20 results (but still even more than our expectations). We believe Ebro is at a turning point and we continue to be positive on the stock.
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