Masmovil Ibercom

Yusuf Sule | yusuf@9fin.com

The European commission has extended its in-depth review of the Orange-Masmovil Spanish joint venture (LORCA JVCO). Management remained optimistic on Tuesday’s (9 May) call, explaining they have since further outlined to regulators the strong competitive dynamics in Spain. The final ruling is expected in September 2023. LORCA JVCO has an EV of €18.6bn, €7.8bn (7.2x 2022E EBITDAaL) for Orange and €10.9bn (8.7x 2022E EBITDAaL) for Masmovil. 

Q1 2023 earnings were stagnant, with revenues flat +1% YoY to €740m mainly thanks to the addition of 131k Mobile Postpaid lines from Q4 to 9.4m in Q1 23. Although sales guidance was not discussed, management expects increased price competition in the following month, following slight price increases from Telefonica and Orange. Q1 23 Adjusted EBITDA improved 3% YoY as a result of customer base expansion in its consumer television services and the rise in number of premium services. 

Recurrent capex, which is predominantly infrastructure maintenance, was €81m (11% of total revenues) in Q1 23, which was in line with Q1 22 which was also 11% of revenues. Q1 23 gross capex was €105m and in line with expectations to reach the FY 23 guidance of €500m-€550m

Net leverage remained stable at 5.2x vs 5.1x in FY 22 and management gave no guidance as to target levels for FY 23.

Trivium

Arturo Alaimo | arturo@9fin.com

Read our full earnings review here.

Trivium (B3/B), the Dutch producer of metal packaging, released weak Q1 23 results, with adj. EBITDA declining by 61.5% YoY to $80m. Revenues remained flat at $778m (vs $780m in Q1 22) supported by consistent pricing. The group is still experiencing de-stocking momentum from customers, which has continued in Q2 23 according to management. 

Projected flat volumes for the year and the negative impact of the inventory revaluation are expected to hit 2023 EBITDA performance, guided lower than FY 22 by management on the call.

The one-off inventory revaluation effect that boosted EBITDA growth in 2022, has not materialised in Q1 23, driving margins down to 10.3%, from 26.7% in Q1 22. According to management, this timing effect positively impacted EBITDA generation with $94m in Q1 22, compared to a negative $20m in Q1 23.

With adj. EBITDA plummeting, net leverage also rose to 6.1x, compared to 4.4x at 2022 year-end. Management continues to believe they will be able to achieve the 5.3x target (5.6x including the timing effect on input costs) through improved performance in the second half of the year. 

Ceramtec 

Hee Li Leung | heeli@9fin.com

Ceramtec (B3/B/B), the manufacturer of advanced ceramic products, has recovered from Covid, reporting strong FY 22 results with continued growth across all end markets and regions in both the medical (16.9% revenue growth) and industrial markets (11.1%). Revenue and adjusted EBITDA grew by 13.9% and 12% respectively, driven by strong demand for implants in all geographies, as well as positive volume and price impact on electronics, sealing and machinery in the industrial sector. 

In particular, demand from Asia and North America drove growth in medical and industrial sales, but the company is still facing supply chain struggles from the mobility end markets regarding semi-conductor chips, and is expecting a continued slowdown in the European industrial market. Despite increased prices and higher volumes, results were somewhat offset by inflation and energy costs, and price increases contributed to only 2% of overall growth. Management plans to mitigate energy costs, having hedged around 60-70% of its demand for 2023. 

Working capital grew from €11m in FY 21 to €98m, as a result of a strategic build-up of safety stock. Investments to increase capacity also contributed to cash outflow, especially in the medical market, increasing capex to €71m in FY 22 compared to €48m in FY21. 

As a result of last year’s LBO, which saw CPP Investments acquire a 50% stake and existing sponsor BC Partners buy the remaining stake from its 11th fund, the company significantly re-levered to 7.3x in Q1 22 (from 5.1x in Q4 21). It has managed to bring leverage slightly down to 6.7x by end of the year thanks to improvement in EBITDA. Liquidity stands at €276m, consisting of an undrawn RCF of €240m, a short-term credit line of €10m, and a cash balance of €26m. 

Demire 

Hazik Siddiqui | hazik@9fin.com

Read our full earnings review here 

While sentiment in the German real estate market remains somewhat pessimistic, Demire, the Germany-based commercial real estate operator, saw an 8.8% like-for-like rental growth in Q1 23. This was driven by indexations, a common theme for real estate lessors in recent weeks.

Demire has sold two of its largest three assets in the past five months to bolster liquidity and fund bond buy-backs. It first sold its largest asset, Logpark in Leipzig, in late December (more here). And in April 2023, the company announced the sale of its second largest, Ulm, for an undisclosed valuation.

Based on 9fin’s estimates (workings explained here), the asset could be sold at a discount of 11.7% to FY 22 book value of €87m. Assets held for sale as of Q1 23 excluding Leipzig (yet to close) of €193.2m were marked down by €25.5m from FY 22 for fair value adjustments, equating to an 11.7% discount. Were this discount to apply broadly to all assets held for sale (ex. Leipzig), gross proceeds for Ulm could be ~€77m.

Q1 23 net LTV of 54% drops to ~47% pro-forma the Ulm disposal, per management. We estimate pro-forma net LTV inclusive of the April 2023 bond buy-back also drops further to 45.5%-46.5%. Demire’s assets held for sale balance indicate another ~€116m of asset sales are planned after Ulm. In our view, this should be more than sufficient to achieve the desired LTV target of below 45%.

Ferroglobe

Arturo Alaimo | arturo@9fin.com

Silicon metal producer Ferroglobe (B3) reported disappointing results on Wednesday (10 May), with both Q1 23 revenues and adj. EBITDA significantly down YoY. Declining selling prices across the business alongside weak demand were the main factors impacting performance.

Revenue for the quarter dropped by 44% YoY to $400.8m, while adj. EBITDA dropped by 81.5% YoY to $44.7m. In the presentation, management outlined QoQ price decreases, specifically, silicon metal prices decreased by 6.5%, silicon-based alloys 13.4% and manganese-based alloys 10.2%. During the call, management affirmed that this is the trough, and prices should start to increase again with improved demand.

According to management, oversupply from China and India is affecting pricing of its products both in Europe and US.

On the demand side, customers seem to be in a strong de-stocking momentum, especially for silicon and manganese-based products, with demand decreasing by 23.2% and 24.3% from Q4 22. Volumes also largely impacted by the shutdown of the group’s France facilities, that will resume in Q2 23. 

On the bright side, free cash flow increased to $117.5m (vs $57.1m in Q1 22) on the back of a $131.1m working capital release. Two years after the A&E in 2021, the group now benefits from a healthier cash position ($344m) and is continuing to deleverage with net debt standing at $55m (-57% QoQ), while targeting a positive net cash position in the next couple of quarters. Management mentioned they will be addressing the company’s $350m SSNs due 2025with a refinancing expected in the coming months.

Recordati 

Josh Latham | josh@9fin.com

Recordati (B2/B), Italy-based pharmaceuticals manufacturer, reported strong Q1 23 results with revenues at €551m, up 31% YoY, or 21% on a like-for-like basis at constant exchange rate. Performance in the quarter reflects underlying volume growth across all key markets, as well as strong price increases in Turkey. 

Cough and cold pharmaceuticals are showing continued strong recovery, and are well above pre-pandemic revenues, with Q1 23 revenue at €47m, a 35% increase from Q1 19 pre-pandemic, and a 67% increase from Q1 22. Revenue momentum is due to exceptional growth in their OTC and Rx products, but is not expected to be sustainable for the rest of the year due to expected FX headwinds on the Russian Ruble, and unwinding of the phasing of shipments to international distributors that took place in Q1.

When questioned on M&A, management said their strategy hasn’t changed, and they are prepared to take opportunities if they become available. Management added that they would be willing to go as high as 3x net leverage — from 1.8x currently. 

Management expects to exceed top line guidance for FY 23. Revenue is forecasted around €2bn with mid-single digit growth for Specialty and Primary Care medicines and double digit growth for rare disease products. EBITDA is projected at €750m-€770m, with margins creeping closer to 37% (from ~36%). 

Titan Cement

Alexandros Chatzigiannis | alexandros@9fin.com

Titan Cement (BB), the manufacturer of cement and building materials marked a solid start for the year continuing its record high performance in FY 22. Despite Q1 being a seasonally low quarter for the group, rising demand in their key markets derived from milder weather conditions in Europe and successful pricing adjustments across their business maintained both top and bottom lines at record levels. 

Group sales in Q1 stood at €588.1m vs €454.6m in Q1 22 (+29.3% growth YoY) thanks to a combination of a +2% growth YoY in cement volumes and effective price increases across US and Europe, regions that represent 90% of total sales. EBITDA in Q1 grew for the fourth consecutive quarter peaking at €107.1m (+10% growth QoQ), while margins returned back to pre-Covid-19 territory (18.2%) as a result of improved cost management from using a broader energy mix.

Robust EBITDA performance managed to somewhat mitigate elevated capex levels (+28% YoY) and working capital outflows for inventories to support increased demand (€82m, +60% YoY). Operating free cash flow (CFO-Capex), however, turned negative in Q1 at -€19.7m (vs €18.8m in FY22 and -€34.7m in Q1 22). Capex investments focused on capacity expansion mainly in the US and Greece. The group added two more capex projects to its pipeline — the Metro Line 4 project in Athens, and the Northern Carolina Highway project. 

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