Cognor – FY2019 Outlook Hurt By Dismal Third-Quarter Results
Cognor reported much worse-than-expected results for Q3 2019 led by weak sales after longer-than-expected plant closures for maintenance. As a result, we are compelled to cut our F2019 EBITDA estimate for the Company from PLN 123m to PLN 110m, with the net profit forecast lowered from PLN 45m to PLN 36m. Cognor has changed its accounting approach to maintenance expenses this year, and this, combined with negative FIFO accounting effects and persistent falls in scrap and end-product metal prices will probably continue weighing on EBITDA growth in Q4 2019. With the ex-dividend date now behind us, we see no upside potential in COG at this time. Investors who took our advice to accumulate the stock, issued at PLN 1.65 per share, given PLN 0.28 DPS (paid out on 21 October), would have earned a return of 9% on Cognor. Today we downgrade our call to hold with the target price reduce from PLN 2.00 to PLN 1.55 per share.
Cognor Holding SA, formerly Cognor SA, is a Poland-based company that operates in the steel industry. The Company's activities are divided into four business segments: Scrap, Production, Distribution and Other. The Scrap division focuses on buying, processing, refining and selling of scrap metal and nonferrous scrap. The Production division is responsible for processing scrap metal into steel billets, as well as converting steel billets and nonferrous scrap into finished products. The Distribution division sells various commodities, such as steel products, steel and nonferrous scrap and steel billets. The Other division includes materials recycling, among others. The Company's products range comprises metal bars, steel sheet, plates, pipes and rods, as well as sheet zinc and tin plates, among others. It operates through a number of subsidiaries, such as Cognor Blachy Dachowe SA, Zlomrex Metal Sp z o o and Huta Stali Jakosciowych SA. The Company is controlled by PS Holdco Sp z o o.
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