Loxam Faces Headwinds in Q1 2025 as Revenue Declines Amidst Strategic Cost Management

We change our view on Loxam (NR/BB-) from positive to neutral, as we believe the issuer is expensive, trading inside its credit curve and in line with Rexel 2030 rated Ba1/BB+ (2 notches above Loxam). In relative value, we are sellers of the Loxam 4.25% EUR Notes due in 2030 (50bps targeted widening on the Z spread) and buyers of the Boels 5.75% EUR Notes due in 2030 rated B1/BB. Loxam reported mixed Q1 2025 results, highlighting a challenging market as sales and margins declined . However, the group has been able to partly mitigate choppy performances through effective cost management, contributing to debt reduction. The company's positive FCF and prudent capital allocation position it well for future growth opportunities as the construction market stabilizes . The ongoing decline in certain divisions, particularly in the Nordic region, underscores the need for continued vigilance and strategic adjustments. Despite the challenging environment, the leverage ratio remained relatively stable at 4.36x (vs 4.34x in FY24) and is close to Loxam's leverage before its last transformative acquisition in 2018.