Constellium : Latest weak set of results provides with a good entry point
Constellium, as well as its direct peers, has experienced a difficult 2024 market by both weaker-than-expected demand in key end-markets, and one-off events, leading to a significant profit warning issued during its Q3 2024 results. While market conditions are not expected to improve in 2025, profitability should experience a significant boost from non-market driven events, including the opening of facilities, better terms on contracts, cost saving initiatives, and the phase-out of one-offs. We therefore expect FCF generation to turn back to positive territories in 2025, and net leverage to come down in 2025 after the peak in 2024. The liquidity position remains very comfortable while the company has no significant debt maturing before 2028.As a result of the weak performance and the profit warning issued, the outstanding EUR bonds have lost some ground. They now offer a good premium of around 70bps against the comparable universe. Given our expectations of positive FCF generation, and deleveraging next year, on top of long-term trends remaining positive for aluminum products, we see this set back in price as a good entry point. Hence, we are upgrading our recommendation on both EUR bonds (2029 & 2032) to Buy (from Neutral).
Constellium N.V. designs and manufactures a range of innovative specialty rolled and extruded aluminum products, serving primarily the aerospace, packaging and automotive end-markets. Co. has a strategic footprint of manufacturing facilities located in the United States, Europe and China. Co.'s product portfolio commands higher margins as compared to less differentiated, more commoditized fabricated aluminum products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution. Co. organizes its business around three operating segments: Aerospace & Transportation, Packaging & Automotive Rolled Products, and Automotive Structures & Industry.
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
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