IBERIAN DAILY 29 SEPTEMBER (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACERINOX, AENA, ENCE, GRIFOLS, IBERDROLA, MAPFRE, NATURGY, SANTANDER.MARKETS YESTERDAY AND TODAY
Inflation fears resume
Inflation pressures rose on the markets while oil prices reached new intraday highs and pushed interest rates higher, which led to strong corrections at both sides of the Atlantic, where value beat growth again.
Thus, all sectors in the Euro STOXX, with the exception of Energy, ended with losses, led by Technology (around -5.0%) and Real Estate. On the macro side, in the US, consumer confidence dropped more than expected, mainly the expectations component whereas the Richmond Fed manufacturing index fell to negative territory unexpectedly in September. Meanwhile, the leaders of the Central Banks of the BoE, ECB and Fed insisted that inflation is transitory and that the monetary policy should not be modified due to supply problems. As for the debt ceiling, Republicans once again voted against increasing financing the Govt. yesterday, and today the Democrats will try again, while Yellen is warning that the Treasury will have run out of funds on 18 October. Lastly, Senator Warren would vote against a reelection of Powell at the head of the Fed.
What we expect for today
European stock markets would open with rallies of less than +0.5% following the sharp drops yesterday. Currently, S&P futures are up +0.6% (the S&P 500 ended unchanged vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 23.25). Asian markets are falling (China’s CSI -0.9% and Japan’s Nikkei -2.6%).
Today in the euro zone we will learn September’s economic climate indicator, in Spain September’s preliminary inflation. In debt auctions: Greece (€ 625 M in 6M T-bills), Italy (€ 4.75 Bn in bonds due 2026, 2031 and CCT 2026) and Germany (€ 4 Bn in bonds due 2031).
COMPANY NEWS
ENCE, BUY
The 1H’21 operating Results had been already released, and thus there was no news on the EBITDA and NFD performance (excluding the impact from the ruling). Adjusted EBITDA totalled € 57 M (+61% vs. 1H’20), in line with our estimate, while adjusted Net Profit came in at € 2 M (vs. € -25.4 M in 1H’20; € -195 M including the impact from Pontevedra), vs. € -2 M BS(e) thanks to a more positive tax rate.
The main update is the accounting impact from the Pontevedra ruling, whereby the company accounts € -181 M after provisions/impairment below EBITDA vs. the maximum level expected of € -224 M, as at the current stage of the legal process part of the cost for the necessary restructuring must not be provisioned. Net debt also sees a positive impact of € 29 M, as part of the liabilities linked to the leasing of the Pontevedra factory are cancelled (IFRS16 debt). None of these impacts entail any cash outflows in the 1H’21.
With this in mind, NFD at the end of the 1H’21 came in at € 176 M (including the reduction of debt IFRS16), in line with the level seen in YE’20.
In summary, as EBITDA had been already anticipated and the impact from the ruling does not entail any cash outflows, these results should not have a relevant impact on the market that is paying closer attention to the evolution of the legal process. The share price has slid -27% vs. IBEX since the announcement of the ruling annulling the extension of Pontevedra. The current share price, according to our numbers, would already be factoring in the immediate closure of the Pontevedra factory and a recurring hardwood pulp price -10% below the average over the past 10 years. Currently pulp prices in Europe are at US$ 1,140/t (vs. US$ 680/t in 2020), although we do not rule out the possibility that it could fall in the short term following the correction in China (to US$ 622/t net from the May peak of US$ 780/t). Conference call at 15:30 (CET).
SANTANDER, BUY
In an official market communiqué sent out yesterday, SAN announced its dividend policy going forward. In the end, as expected, it will be based on 40% of Underlying Net Profit (vs. a range of 40-50% previously), in line with our estimate and the consensus only for 2021. The shareholder remuneration will be come in equal parts: 20% in cash + 20% in share buyback, both in the interim dividend (payable in November) and the final dividend (payable in May of the following year). The new aspect in the policy is the share component, although to a certain degree the Company had already been indicating that this could be one of the options on the table.
Thus, and specifically, the total upcoming interim dividend will reach some € 1.7 Bn, i.e. €~0.10/sh. (3.25% yield), broken down as follows:
(i) € 0.0485/sh. (1.57% yield) in cash. Payment date 02 November (ex date 29 October).
(ii) € 0.0485/sh. (1.57% yield) in share buyback, totaling some € 841 M, to be carried out in the near future. At the current share price this means 273 million shares (1.57% of current total).
If the results momentum continues, SAN announces a total DPS’21 of € 0.20/sh., € 0.10/sh. in cash (similar to 2019) and another € 0.10/sh. in share buybacks (~3% in terms of market cap). Total yield ~6.5%.
With all this in mind, the Company reiterates that its FL CET1’21 would be close to the high end of its guidance range (11-12%) vs. 1H’21 at 11.7%, and we believe this is achievable. Note here that to date SAN had been reserving in capital an amount near the top of its guidance range (50%), following the regulator’s instructions. Thus, it will now have to adjust this figure to 40%, which will mean some +8bps BS(e) of capital recovery, and this would at least help mitigate the pending capital adjustments (-18bps from regulatory measures, -8bps from minority interests in Mexico and -10bps from minority interests in SCUSA).
The total DPS’21 announced of € 0.20/sh. compares with our € 0.17/sh. estimate, similar to that of the consensus. In the medium-term, the market estimates (Factset) were closer to a 50% payout in the 2022-23 period (vs. the 40% we assumed in our estimates out of caution). The share buyback is positive news.
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.
Aena SME SA, formerly Aena SA, is a Spain-based company primarily engaged in the airports operation. Its activities are divided into four segments: Airports, which comprises Aeronautical subdivision, responsible for the management of airports, jetways, security, handling, cargo and fuel services, among others, as well as Commercial subdivision, including duty-free and specialty stores, restaurant services, car rental, as well as banking services and advertising; Services outside the terminal, which manages real estate assets, such as parking lots, warehouses and lands; International, which comprises operations of Company's subsidiary, Aena Desarrollo Internacional SA, that invests in other airport owners principally in Mexico, Colombia and the United Kingdom; and Others, encompassing corporate activities. It manages tourism, hub and regional airports, as well as heliports and general aviation areas. Furthermore, its destination range comprises Europe, the Americas, Asia and Africa.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
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.
Mapfre is an insurance company based in Spain. Co. is the parent company of a group engaged in the underwriting and provision of insurance in Spain and abroad. Insurance policies provided include: life, non-life, accident, home-owner, general and health. Through its subsidiaries, Co. is also engaged in the provision of reinsurance, the management of investment funds, pension funds and pension plans, real estate and related services. On the domestic market, Co.'s activities include managing investment funds, pension funds and pension plans, real estate and other service businesses.
Solaria Energia y Medio Ambiente manufactures both solar and thermal cells and panels, rolls out turnkey projects for large installations, operates solar plants and generates electricity through its owned plants.
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