EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 FEBRUARY + 4Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, AENA, LIBERBANK, OHL.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 4Q’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

Europe holds up as the Ibex struggles
It was a session without significant macro references in which most European indices saw some profit-taking, with value stocks lagging behind. The Ibex, however, ended down -1.5% after the gains posted throughout February. Thus, within the Euro STOXX, almost all sectors ended in the red, with Personal Consumption and Retail being the best relative performers vs. the larger drops in Energy and Utilities. On the macroeconomic level, in the US the approval of the fiscal plan through the reconciliation budget is highly likely, which would be slightly below US$ 1.9 trillion. In Italy, M. Draghi would obtain between today and tomorrow the support from the political groups to become Prime Minister. In China, January’s inflation data dropped unexpectedly while production prices climbed much more than expected, which would benefit the basic resources sector. In US business results, Fox, Incyte Corp and Gartner came in better, Carrier Global worse.
What we expect for today
European stock markets would open with slight gains of around +0.5% that could be diluted throughout the session, with the Basic Materials sector underpinned by the rising prices in China and the dollar’s depreciation. Currently, S&P futures are up +0.35% (the S&P 500 closed practically unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 21.63). Asian markets are rising (CSI 300 +2%, Japan +0.2%).
Today in Germany we will learn January’s inflation data, in the UK the 4Q’20 GDP data and December’s industrial output, in the US, January’s inflation data, and in Brazil, December’s retail sales data. In US business results, Coca-Cola, IQVIA, Under Armour and General Motors, among others, will release their earnings. In debt auctions, Italy (€ 6 B in 12M T-bills) and Germany (€ 4 Bn in bonds due 2026).


COMPANY NEWS

ACS, BUY
CIMIC (77% Hochtief (50.4% ACS) and 44% EBITDA from ACS) has just published FY2020 results where the impact of Covid-19 and other one-offs related to the Gorgon project, the sale of 50% of Thiess and other non-recurring impacts is appreciated. Underlying sales fell -14% vs. 2019 (in local currency; in line with our estimates), although this represents + 5% vs. 3Q'20. The underlying EBITDA margin increases by +60 bps vs. 2019 to reach 15.2% (vs. 16% in 9M'20), so that EBITDA drops -11% vs. 2019 (we have -20% in our estimates for the year). The Net Profit falls by -25% vs 2019 (vs -20% BS(e)).
Operating cash flow before factoring (which has been reduced by € -526 M excluding the effect from the sale of Thiess), leases and CAPEX (which has decreased by -27% vs. FY2019) fell to AUD 579 M vs. AUD 1.71 Bn in FY2019 (AUD 9 M in 9M’20), which we understand would be due, to a great extent, to a worsening working capital position (no breakdown has been given) that could be partially due to a drop in order intake (and therefore fewer down payments coming in). This implies some deterioration vs. FY2019, which we estimate at some AUD~900 M (AUD 550 M vs. AUD 700 M for ACS BS(e)). Thus the company ends the year with a net cash position of AUD 180 M vs. AUD 831 M at the end of 2019, after the well-known impact from BICC, the sale of 50% of Thiess and after AUD -281 M in share buybacks.
On the order intake side, the new awarded contracts are reduced -58% (as a result of the Covid-19 crisis; -52% as of 9M’20), leaving the backlog at A$ 30.8 Bn (-8% vs. 2019; 2.4x sales’20), a drop partly offset by the incorporation of A$ 3.1 Bn stemming from the acquisition by Ventia (stake below 50%, and thus it does not consolidate, although the proportional part of the backlog does) of Broadspectrum in 2Q’20.
Lastly, CIMIC announced the resumption of dividend with a 60-65% payout vs. 2H’20 and a Net Profit guidance’21 with between +8% and +16% growth vs. 2020.
In sales the results are not surprising (although they still show a slowdown in activity due to Covid-19) and the margins are better than expected. Cash generation was worse than expected, but we already expect ACS’s working capital for the full year to worsen, and awaiting the results of the rest of the group, we estimate that it should be close to our full-year estimate (€ -700 M worse for ACS in 2020).
The stock has fallen -17% on the Australian stock market, but this could be due more to the news of arrests made in relation to BICC (CIMIC has provisioned this subsidiary and does not expect more of an impact) learned during the night.