Renta 4 : The company announced that it was changing the way it publishes results as of 2024. The main changes are: 1) New “sustainable solutions” division, whose results come from the Europe division (which is revised), 2) inclusion of the contribution of the net results of the JVs, mainly India, Calvert (USA), China and others, which were previously in the results of investees and 3) ACIS (Eastern Europe, South Africa and others) move to “Other” results after the sale of the business in Kazakhstan. There are no changes in NAFTA, Brazil or Mining. We adjusted the previous series to adopt the changes. These changes imply higher EBITDA (contribution from JVs), although they will have no changes in EBIT, net income or cash generation.
➢ We expect 3Q24 results to show deterioration versus 2Q24 due to the weak tone of demand and pressure from imports, mainly to Europe. These factors have led to price and shipment declines, the latter partly affected by seasonality.
➢ We discount price and shipment declines in all markets and shipments. We expect a drop in shipments, down 4% against 2Q 24 (North America 1%, Brazil 1% and Europe 6%) and prices, also down 3% against 2Q 24 (North America 4%, Brazil 2% and Europe 3%).
➢We expect JVs to contribute US$176m to EBITDA, slightly below 2Q24 and Sustainable Solutions contribution to reach US$80m (US$95m in 2Q 2). In Mining we expect shipments to go up 3% due to recovery after the fires in Canadian facilities in 2Q 24 and prices to be 10% lower against 2Q 24. Thus, we expect at group level revenues to give up 7% to $15,096m, EBITDA 18% lower than 2Q 24 to $1,532m (consensus $1,488m) and net income $470m (8% lower than 2Q 24) (consensus $420m).
➢ We estimate net debt to increase by around $1,660m against 2Q 24 to $6,983m mainly due to: payment of the 28% acquisition of Vallourec ($876 million) made in August, share buyback already advanced ($290 million), working capital investment ($100 million), and capex ($1.1 billion). The 2024 R4e net debt/EBITDA 2024 multiple would remain at a very conservative level: 0.9x.
➢At the conference call (7 November 15:30h) we will be keeping an eye on: 1) tone of demand (apparent and final) after the fall in prices since March and 2) evolution of imports and tariff measures to avoid massive entry of steel at excessively low prices to the geographies where AM operates, and mainly Europe.
➢ In our opinion, the potential of the stock is high and we believe that it is a good time to enter the stock considering that current prices reflect that the sector’s evolution is at the bottom of the cycle and that this circumstance usually bodes well for the stock’s evolution in the coming months. The main catalyst is a recovery in prices, which is not happening at the moment. P.O. €30.7 and OVERWEIGHT.
