Emeria : Stress on liquidity

For several quarters now, Emeria has been disappointing in its ability to reduce exceptional costs and working capital. It is now also worried about its liquidity. The over-optimism of recent years, characterized by a frenzy of purchases and an (overly?) ambitious transformation plan, has removed any room for maneuver: FCF is strongly negative, debt is close to unsustainable and prospects for recovery in flow business are slim. In Q3, liquidity was only € 72m (-€ 33m q/q), if we disregard the change in management's calculation method, which seems to have gone unnoticed. In Q4, liquidity should recover (~€ 115m) due to seasonal effects. However, we expect considerable stress in H1 2025 (<€ 20m), forcing shareholders to lend their support in the absence of other solutions. Emeria is on the verge of a severe liquidity crisis and therefore of a downgrade to CCC: we confirm our recommendation to Reduce on the SSNs 3.375% (B-/B3) and SUNs 5.000% (CCC/Caa2) bonds. Our recommendation on SSNs 7.750% (B-/B3) has been downgraded to Reduce (from Neutral).