The EBIT margin declined from 14% in Q1 to 12% this quarter, as rising supply costs and logistics constraints impacted profitability; overall, however, this is well under control and the company is on track to attain the top end of its guidance, if not overshoot this.
Companies: Fuchs Petrolub SE Pref
The release mentions that the price increases in base oils will impact costs and margins in H2 and that the high sales of H1 are a result of this. The tone remains optimistic though and, overall, the company continues to handle the surge in prices well, as confirmed by the guidance update.
Strong earnings with record sales in China but the upcoming increase in raw material prices raises eyebrows, and despite an increase in the guidance for FY21. In our view, Fuchs seems to be managing this crisis well, as such a strong surge in raw material prices could have been much more dramatic.
A mixed bag, with good Q4 results and a dividend increase which were offset by an outlook impacted by inflation-driven cost increases. Q4 EBIT came in above our estimates, thanks to further cost reductions and cash generation which improved with a working capital release of €52m. Management sees pre-crisis sales but an EBIT at 2020 levels, with higher feedstock costs partly offset by cost management.
The results showed a recovery in America and Europe, while the Asia-Pacific region was up 5% yoy. Despite the lower sales, the EBIT was up €2m, with improving margins in Asia-Pacific and America, on the back of savings on functioning costs and thanks to a higher gross margin. The company seems confident in the future, revising its outlook upwards for FY20 and with a couple of acquisitions realised during the quarter.
The lack of guidance this quarter is not a surprise as Fuchs already struggled to provide a steady outlook when witnessing the slowdown in the automotive market in 2018-19. At the time of the release, management sees a 30% decline in sales in H1 and a 50% drop in EBIT.
While the results came in line with the preliminary update, the focal point was on the outlook. Management has not changed its tune and repeated its outlook prepared before COVID-19 became a pandemic. In our view, this reflects once again the lack visibility in Fuchs’ markets, now grappling with an already slow automotive sector and a European lockdown.
The stock has gained 9% the day of the release as a relief after the last quarter. The results show that June was indeed the nadir in weakness. As a reminder, management decided to warn on its results and reduce its guidance in July, even though the market was already improving. We believe the outlook remains foggy, which perhaps explains the cautious guidance upgrade.
The weakening of both China and the automotive market continue to impact Fuchs. Lower sales, associated with the expansion of the group, eroded the EBIT margin, down 19% yoy. The management alluded to July being better than June (which triggered the profit warning). This might spark some hope although the poor visibility calls for prudence.
Q1 revenues beat consensus (€618m, +12.4% yoy). The quarter was very good, thanks to organic growth in all regions and particularly in China, Australia and South Africa (Asia-Pacific, Africa +25.1%, of which organic +20.9%).
The EBIT (before associates) was in line with expectations, at €89m (+11.3% yoy). The same for net income, at €66m (+12.6% yoy).
- revenues growth at 4-6%;
- EBIT +1-5%.
Q4 revenues came in at €564m (+4.4% yoy), bringing the annual growth to 9.0% as announced in January.
The EBIT for the quarter was €94m (+15% yoy), also in line with January’s guidance.
Outlook 2017: further growth in revenues and earnings, based on a generally positive economic outlook despite the risks in important regions.
New guidance 2016:
- Growth of revenues at c. 9%, topping the previous +7-8% range after currency effects;
- EBIT +8% (vs. +4-6%).
Q3 revenues were €566m (+7% yoy), slightly below consensus estimates.
EBIT came in at €93m (+10% yoy), slightly below consensus.
Net income was €65m, just marginally below consensus.
Guidance 2016 has been confirmed:
- growth of revenues at the top end of +7-11% range (“at the top end” is an improvement); +7-8% after currency effects;
- EBIT increased to +4-6% (vs. +3-7%);
- FCF before acquisition in the upper end of €170-200m range (here also “upper end” is an upgrade).
Q2 revenues grew by 14% yoy, to €576m, driven by Europe (+27% yoy, to €372m). In Asia-Pacific & Africa, organic growth was more than offset by currency weakness. The Americas were also affected by South American currencies.
The EBIT came in at €102m (+18% yoy), beating consensus (at €92m). In Europe (+20%), growth was supported by the recent acquisitions (Pentosin and Statoil Fuel & Retail Lubricants). However, Asia posted a 7% decline, largely due to currency weakness and soft Australia and So
Fuchs Petrolub (market cap.: €4.8bn) is the largest global independent manufacturer of lubricants.
Fuchs’ strategy is based on differentiation, through a “specialised” positioning, differing from those of vertically-integrated mineral oil companies, which target broad sales channels (e.g. supermarkets or fuel stations). Fuchs focuses on technological leadership within niches and premium business segments.
The company sells c. 10,000 KPUs and enjoys a c. 2% market share (the top 10 manufacturer
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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
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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
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
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