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Beiersdorf’s growth continued in the third quarter despite the headwinds in the luxury segment coming from China. While La Prairie suffered from lower travel retail, Derma and Eucerin clocked double-digit growth rates. tesa continued to see organic growth backed by good demand from auto and in the Consumer business. The sales statement was a beat versus our expectations.
Companies: Beiersdorf AG
AlphaValue
Beiersdorf reported a strong set of figures as some well-known Consumer brands benefited from the early hot weather in the Northern Hemisphere and the ability to serve customers demand. This was compounded by the re-listing at some retailers, especially in Germany. On the back of the better-than-expected figures, the management lifted its FY top-line guidance although the profitability guidance remained unchanged. Following the call our conclusion was that this implies some conservatism as the
After Beiersdorf’s strong start to the year, the higher FY sales guidance seems to have baked in some conservatism as the Q2 is likely to also be a strong quarter. The firm seems to have sloughed off some habits like old clothes. Innovation and digitalization are two sides of the same coin. The so-called brand equity has become strong at all four Consumer main brands, which should stabilise the future revenue streams.
Today’s Beiersdorf looks different to prior to the pandemic. The last management change seems to have given the company a positive impetus. This is also the case for shareholder returns, with the CEO seemingly working hard to make better use of the significant cash pile. Any change on this front could be a trigger for the Beiersdorf story, in our view, although Rome wasn’t built in a day.
Beiersdorf found it difficult to totally allay analysts’ concerns regarding profitability and potential recessionary developments in the coming quarters. However, the management tried the tackle this point by lifting the guidance against a backdrop of strong growth across all the brands. The positive point, in our view, is that profitability could be ‘managed’ as the company is managing to make some positive investments. The reported figures were above our estimates.
Beiersdorf delivered another strong quarter, reporting a moderate acceleration in organic growth momentum in Consumer. The Blue Elephant trumpeted on to attack, whereas China backed La Prairie pushed the gas pedal. The Chinese restrictions were also part of the explanation for tesa’s still good but subdued performance.
The Beiersdorf management made a big show of presenting the company and their belief in how the new Consumer growth and profitability targets will be reached. Interestingly, investors did not seem to see the blue sky scenario as a given. There was also some disbelieve about the success of recently acquired companies as well as about future ones. The management thus had to answer many critical questions, which it did underwhelmingly in our view.
The pandemic is far from over and developments in China will have a material impact on Beiersdorf’s performance. To make it a perfect storm, the situation on the raw material side also remains challenging, and not only in terms of prices. The up date situation has slightly watered down the strong Q1 start with management none too enthusiastic for the remainder of the year. We see Q2 developments potentially triggering some guidance revision.
The margin guidance looks odd at first sight, as it may be a challenge in the current business environment, which might become even worse against the background of the Ukraine war. Beiersdorf has been quite successful in passing on higher input costs, but we believe that pricing power will become more and more limited and internal cost cutting will also see its limits. We were beaten at the revenue line by +2.5% and on EBIT level by +5.0%.
Beiersdorf has returned to the not well-paved M&A path with a small and expensive acquisition. The US-based business might help the company to speed up its CARE ambitions, but it does not need any toe-holds in these regions. Chantecaille’s philosophy might be helpful to target a new customer group, but there are limited cross-fertilisation opportunities. However, it looks different when it comes to sustainability. Here Chantecaille makes a difference, which might be beneficial for La Prairie.
Today it was made crystal clear that Beiersdorf is a marketing machine with a skin care affiliate. The sluggish Q3 performance was covered by presenting 9M figures in the trading statement. Some additional Q3 figures were provided in the presentation, of which those representing growth rates of core product groups could not be correlated to other information provided. Beiersdorf’s figures came in weaker than anticipated and the potential future development was not well explained.
Basically, the Q2 growth was against quite a weak basis, but a good continuation of the already paved recovery. La Prairie especially saw strong demand, despite some travel restrictions still. Digitalisation seems also to be taking off, supporting Beiersdorf’s luxury brand, which was solely sustained by offline retail. tesa made a strong and lasting contribution due to its positioning in electronics and electrics. Our quite moderate expectations were beaten.
… we have to change our view on Beiersdorf. Until yesterday evening, we had the impression things were going well, but the unexpected dismissal of the CARE+ initiator, Mr De Loecker, has forced us to re-think our position despite the indication that the new CEO will follow the same path. Like all other CEOs, we believe, Mr Vincent Warnery will put his own mark on the position, but this might be difficult given the current time frame. Preliminary figures had been released earlier this month.
… thanks to smaller tesa. As a quite close competitor in this area already flagged (Adhesives Technologies – Henkel), adhesives in general had a strong start to the year but, due to tesa’s stronger focus on automotive and electronics, the direct comparison differs greatly. The second message was the re-bounce at the group level continued sequentially, and Consumer sending some vital signs was the third message. Nevertheless, the absolute figures fit into our broad picture as FX headwinds knock
The higher investments under the umbrella of the already expensive CARE programme have to seen and valued against the back of the current CEO’s predecessor and his targets. This meaningful investment needs to be better explained. Having already pre-released some adjusted figures, the full set of figures brought profitability much closer to our expectations.
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We note the regulatory announcement this morning from Surface Transforms and withdraw our estimates and valuation, pending conversations with management.
Companies: Surface Transforms PLC
Zeus Capital
Surface Transforms has issued new revenue guidance for FY24, with the company now expecting revenues in the range £17.5-22m. We are withdrawing our previous forecasts for FY24 and withdrawing our price target while we review the impact of the new guidance.
Cavendish
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Companies: Nexteq PLC
Canaccord Genuity
Surface has issued a brief Q1 update. Production will ramp-up this year as final new equipment is installed, and manufacturing teething problems recede.
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Shore Capital
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Hybridan
Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.
Companies: Dowlais Group PLC
Edison
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Liberum
Nexteq’s FY23 results show adjusted EBITDA +4% ahead of the +6% upgrade at the January trading update, record FY23 EFCF of $17.4m, and a confident outlook that leads us to reiterate our FY24E revenue and upgrade FY24E gross profit, adj EBITDA, and EFCF by +1-10%. The strategic focus on higher-margin products and customers reducing elevated inventory levels led FY23 group revenue -5% yoy to $114.3m, with Quixant 6% lower at $69.3m and Densitron 2% lower at $45.1m. Effective supply-chain managemen
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Companies: Gooch & Housego PLC
Residential-for-rent developer and manager Watkin Jones on 25 January delivered FY22 results that were broadly in line with our expectations. Continuing strong demand for its core rental developments, as highlighted in October, was hampered by delays in investment decisions following the mini-budget. We believe recovery has begun, albeit on a slightly shallower trajectory, and current market conditions may offer the group opportunities. Surveys show continuing rental growth, attracting back inve
Companies: Watkin Jones Plc
Progressive Equity Research
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