IBERIAN DAILY 12 JULY (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACERINOX, CAIXABANK, ENCE, IBERDROLA, REPSOL, TALGO, TOURISM SECTOR.MARKETS YESTERDAY AND TODAY
Friday’s rally did not offset the week’s performance
Friday’s recovery did not offset the week’s poor performance of the European stock markets, which ended the week with drops of around -0.5% and in certain cases (like the Ibex) of as much as -1.5%. Within the Euro STOXX, the week’s best-performing sectors were Real Estate and Basic Resources whereas Energy (dragged down by the falling crude oil prices from their highs) and Travel&Leisure ended with drops of more than -3%. On the macro side, in Germany, the ministry of Foreign Affairs included Spain in its Covid-19 high-risk areas list, although this will not have any consequences in practice (a negative Covid test or vaccination will be demanded, as is now the case). Separately, the ECB minutes showed that most members support an increase in purchases in 3Q’21, although tapering was discussed in view of the rising growth and inflation rates. In China, the PBoC cut the banking reserve ratio by -50bps starting on 15 July (it will release US$ 154 Bn), whereas the M2, new loans and total financing increased more than expected in April. In Japan, machinery orders saw its pace of growth increase more than expected in May. Lastly, the ministers of finance and central bankers of the G20 backed a minimum global tax rate of 15%, which will have to be approved in Oct 2021. AS for the EU, on Wednesday it will release a report proposing new fuel taxes for the aeronautical sector and tariffs on aluminium imports from countries that are not committed to reducing carbon emissions.
What we expect for today
The European stock markets would open with a slightly bullish slant that might tone down throughout the session amid recovery fears and awaiting the beginning of the US results season tomorrow. Currently, S&P futures are down -0.2% (the S&P 500 ended up +0.2% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 16.18). Asian markets are rising (China’s CSI +1.3% and Japan’s Nikkei +2.2%).
Today the Eurogroup will meet. In debt auctions: Germany (€ 4 Bn in 6M t-bills) and France (€ 5.4 Bn in 3M, 6M and 12M t-bills).
COMPANY NEWS
ACERINOX, BUY
According to Bloomberg, NAS (ACX’ plant in the US, which contributes ~70% of the company’s EBITDA) would be experiencing problems in its supply chain due to the lack of lorries that transport industrial gas to the plant. The same sources point out that this would have led the company to declare “force majeure” and suspend delivery obligations under its contracts.
Negative news due to the noise it can generate, although we believe that this is a temporary problem that should not continue in the long term. In any event, we believe that the financial impact for ACX should be limited, given that this type of issue is usually offset via prices in the short-term, especially considering that the demand remains very strong in the US and stockpiles continue to be low. Moreover, we do not rule out that if the problem is the reception of industrial gas, it can not be extrapolated to the rest of stainless steel manufacturers in the country.
We recall that the NAS plant has a 35% share of the stainless steel market in the US and accounts for ~50% of the country’s production, meaning that we see a very limited risk of ACX’ production being covered by another manufacturer.
Acerinox is the parent company of a group engaged in the manufacture and sale of flat and long stainless steel products, and stainless steel wires. Co.'s major products include slabs, billets, black coils, plates, hot-rolled coils, hot-rolled sheets, flat bars, hot-rolled re-bars, hot-rolled black bars, engraved sheets, cold-rolled coils, cold-rolled sheets and circles. Co. also provides long stainless steel products, such as wire rods, angles, hot rolled flat bars, hot rolled re-bars, reinforced bars in coils, cold rolled re-bars, hot rolled black bars, cold drawn bars, and smooth turned bars. In addition, Co. offers wires, welding wire bars, and bars for electrodes.
Caixabank is an investment company based in Spain. Co. is involved in investment portfolio management activities across two areas: Services and Financial Business and Insurance. In the services area, Co. provides investment solutions for companies involved in the infrastructure, energy, services and entertainment sectors. In the financial business and insurance area, Co. is engaged in the investments for international banks, insurance and specialist financial services. Co. focuses most of its banking investments in India, China, the U.S., and Central and Eastern Europe with a particular interest in retail banking. Co. is also involved in the disinvestments activities.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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