The Q3 21 results were once again above expectations with impressive price realisation particularly in AG. This offset the impact of cost inflation during the quarter, but Q4 is likely to be less favourable. The backlog continued to increase with high demand across-the-board in the US and Europe, arguing for a prolonged up-cycle period. IVECO Group should be listed on 3 January 2022 and take with it a quarter of the FS business.
Companies: CNH Industrial NV
Q1 21 results came in well above expectations thanks to a vigorous demand in all segments and regions. The favourable price realisation and capacity optimisation more than offset the headwinds in input costs and should keep doing so for the remainder of the year. In all, with a filled order book, CNH is more confident for FY21 and, thus, upgraded its top-line and FCF guidance.
FY20 was saved by agriculture equipment, down by only 0.3%. The sharp rebound in demand, coupled with continued COVID-19 cost mitigations in H2 20, allowed for solid cash generation and paved the way for a consistent deleveraging. Confidence dominates for 2021, while the “On-Highway” segment’s spin-off should come by 2022.
CHNI’s Q3 20 sales (+3% yoy) and net income (+95.2% yoy) came in above expectations. This recovery (9M 20 sales: -14% yoy vs. H1 20: -21.4% yoy) was driven by its two largest segments (agriculture: +10.9% yoy, and commercial and speciality vehicles: +1.7% yoy, in Q3 20). In line with the current market conditions, CNHI incurred higher risk costs. Lastly, the company expects its industrial activities’ sales to contract between 10% yoy and 15% yoy, with a positive FCF.
CNHI released results which stated shrinking H1 20 revenue (-21.4% yoy), negatively impacted by its commercial and speciality vehicles segment (-26.6% yoy). This contraction translated into net income of €-1.3bn (vs. €654m in H1 19) and FCF of €-1.3bn (vs. €-541m in H1 19). For the outlook, the company expects FY20 revenue for its Industrial activities to reach €20.9-22.2bn, while keeping a negative FCF (despite its expectations of cash generating FCF in H2 20).
CNH Industrial’s Q1 net sales declined by 15.3% yoy. Furthermore, the industrial activities fell by 16.8% yoy (to $4.99bn), significantly impacted by the March slowdown. As with most companies, management has not yet provided a renewed guidance for FY20, however, the company is bracing for a worse Q2 in most regions and segments. For the moment (and in line with the company’s current expectations for Q2), we see Q2 20 sales shrinking by about 30% yoy.
CEO Hubertus Mühlhäuser has resigned with immediate effect and CFO Max Chiara is leaving as well. It seems Mühlhäuser’s disappearance has come as a surprise, whereas Chiara will take up a new position outside CNHI.
CNHI released some IFRS numbers, but not detailed accounts. While revenue was bang in-line with our projections, net earnings fell slightly short whereas the EBIT number was marginally higher. As the company reports in US dollars, the strength of this currency took its toll. It intends to pay an unchanged dividend of €0.18. Management sees revenue slightly down or flat at best in 2020 and ‘adjusted diluted’ EPS to range between $0.78 to $0.86 compared to $0.84 generated in 2019.
The company including its Financial Services division is highly indebted. At the end of September 2019, consolidated net debt stood at $20bn, $4bn of this was the net debt of the manufacturing segments.
We have argued for quite a while that CNHI needs to pay attention to cash generation or it will need a sizeable share issue. In fact, cash from operations (based on management’s definition) was a negative $708m in 9M19 compared to a positive $164m last year. As a result, net debt increased by $1.5bn to more than $20bn since the beginning of this year.
Michelin acquired the Canadian rubber track producer Camso for an EV of US$1.7bn which represented about 1.7x revenue. Today, CNHI announces the acquisition of a US producer of rubber track systems. Unfortunately, no revenue number or purchase price are available.
Management has released its 2020-24 business plan which not only refers to splitting up the company but also to investing a huge amount into R&D. Revenue is expected to increase by 5% annually and the EBIT margin to reach 8% by 2022 and 10% by 2024 (we see it just below 7% through to 2021).
While the company’s divisional and consolidated revenue numbers fell slightly short of our projections, earnings were about in line. This is odd as earnings generated in other currencies should have suffered when translated into dollars. In fact, CNHI generates more than 50% of its turnover in EMEA and only 25% in North America. Consequently, changing the reporting currency would make sense.
CNHI’s balance sheet shows substantial gross cash (c. $6bn) but a much larger amount of gross debt ($25bn). This latter number includes the refinancing of Financial Services, i.e. of financing and leasing contracts for its clients.
CNHI has been able to increase its ‘adjusted’ EBIT margins in all of its industrial divisions. The margin improvement ranged between 0.7pp in Agricultural Equipment (the single largest operation) and 2.6pp in Construction Equipment (the smallest division). This is the more astonishing as consolidated revenue was down by 4.7%.
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Companies: DX (Group) Plc
Friday's market sell off saw some violent downward moves in many stocks with little initial differentiation between sectors or the key drivers of businesses, creating significant share price drops in a number of higher quality or uncorrelated names. We take a look at some stocks we believe have either seen an unwarranted sell-off, have seen weakness go under the radar or where there is now a more attractive opportunity.
Companies: ANX IBPO CYAN SOM EQT AFM
Seeing Machines has announced that it has been selected as the DMS supplier for automotive programmes through Magna International worth cA$120m and a fundraise of at least US$40m at 11p.
The funds will be used to accelerate growth in the rapidly expanding DMS technology market, across all transport sectors globally. This includes the acceleration of the development of new core software and system features, acquisition of additional specialised technology, expansion of sales channels and produc
Companies: Seeing Machines Limited
Seeing Machines has announced results for its financial year ended June 2021 and, after the 3 August 2021 trading update, there were few surprises in the numbers with the company trading ahead of expectations in terms of margins and cash. This reflects the successful focus by the management on reducing costs and conserving cash. However, with the conclusion of the recent fund raise, we expect the company to change gear to investing in the business and managing for longer term shareholder value.
Whitelee windfarm hydrogen project funding
Companies: ITM Power PLC
The oversubscribed placing to raise £25m and £2m open offer leaves Velocys well placed to move forward on its reference projects and strengthens its ability to address further demand as airlines increasingly seek out sustainable fuelling solutions. We have updated our forecasts for the raise and after a review of project timings. These show that if the company can progress its projects, it is capable of being cashflow positive in FY 24 without recourse to further funding. Our DCF based central c
Companies: Velocys plc
While there remains considerable uncertainty over the planning and permitting of the Uskmouth power station conversion there have been a couple of recent pieces of good news for SIMEC Atlantis in our view. Inclusion of waste-to-energy in the carbon capture support model is potentially positive for Uskmouth and may increase its political attractiveness to the Welsh Government as they consider permitting. The ring fencing of CfD support for tidal steam in the next allocation round opens up the pos
Companies: SIMEC Atlantis Energy Ltd.
The Whitelee project to which ITM is supplying its PEM electrolyser technology has won £9.4m of government funding. We see this project as a key demonstration of the value of co-locating hydrogen production with renewables and indicates a wide market for this key energy storage solution.
Macfarlane Group, the leading protective packaging solutions specialist, servicing clients across the UK
and now emerging into Continental Europe, has issued a trading update this morning (25 November)
covering the period since end June and the year to date. Trading has continued to be robust in a difficult
supply chain environment and the Group now expects to exceed its previous expectations for the full
year. Sales growth for the year to date has accelerated through to October at rate of +2
Companies: Macfarlane Group PLC
The H1 results were a bit of a double check. First, how high hopes (battery materials) persist in a rapidly changing environment, something already communicated to the markets. The second, and a rather annoying one, was how to deal with the issues as management was not really transparent. This explains the strong miss in EBIT compared to the consensus. We were also wrong-footed as our impairment figure was far too low.
Companies: Johnson Matthey Plc
Like Taylor Maxwell before it, management's patience and persistence has landed another prized target, this one HBS NE Limited trading as HBS New Energies and UPOWA, giving Brickability a platform into the fast-growing renewables energy products market. It is Brickability's 13th acquisition in the past three years, will cost a maximum £5.5m and falls within the group's target 4-6x EV/EBITA purchase range thus enhancing earnings whilst broadening the product offering to its core housebuilder cust
Companies: Brickability Group PLC
Oil prices suffered one of the largest ever one-day plunges, crashing more than 11% on Black Friday as a new coronavirus strain sparked fears that renewed lockdowns will hurt global demand. The crash, the 7th largest ever for Brent crude, the global oil benchmark, may prompt the OPEC+ cartel to re-consider its policy when it meets next week, with the group increasingly leaning toward pausing its output hikes. The sell-off was amplified by low liquidity on a festive day in the US, the breach of s
Companies: FO 88E DEC EME GTC TRIN UOG WEN
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Trinistar Liverpool S.a r.L announces its potential listing of a newly formed single asset company which will own the Capital Building in Liverpool on the IPSX. Upon admission the Company would become a real estate investment trust (REIT). The Capital Building occupies close to a 3.5 acre freehold site in the centre of Liverpool’s business district; the building comprises c425,000 square feet of predominantly of
Companies: ADBE ADBE SYM ARC AVCT CMCL CLIN DCTA FRAN OSI
The trading update confirms that TClarke is on track to meet FY21 expectations signalling a strong recovery from the pandemic-hit 2020 with revenues +47%, H2 margins back at 3%, underlying EPS +50% and net cash of c£5m in the year-end balance sheet. The highlight, in support of its target £500m turnover by 2023, is continued improvement in the order book, currently at £525m (end June £503m) including a record £320m (+25%) secured for a year out. This is not ‘being bought' but comes with a real s
Companies: TClarke plc
LTHM announced exceptional results for H1F22 ended 30 September 2021. H1F22 revenue reached £193.9m, +81.2% over H1F21 of £107m. This is notably a stellar first half driven by demand-supply imbalances in global markets that have resulted following the pandemic. Resulting PAT of £26.6m translates to EPS of £1.335 vs. £0.256 in H1F21.
Companies: James Latham Plc