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IBERIAN DAILY 11 FEBRUARY + 4Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ARCELOR MITTAL, MAPFRE.

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

US dragging Europe down
The session ended worse than it began, finally ending in the red after the bearish opening in the US and despite the fact that January’s inflation rose in line with expectations, distancing the debate on inflationary pressure. Thus, in the Euro STOXX, most sectors closed in negative numbers, with Basic Materials and Banks being the best relative performers, compared to the biggest drops in Personal Household Goods and Travel & Leisure. On the macro side, in Brazil retail sales slowed unexpectedly. In the US, J. Powell insisted that the rise in inflation will be temporary and kept his message that the economy will continue to need an expansive monetary policy for a long period of time. On another note, following his first meeting with the Chinese PM, Bided decided to keep tariffs and restrictions until a thorough revision of the Chinese strategy. As regards Covid-19, the WHO has approved the vaccination of the population over 18 years with AstraZeneca’s vaccine while the UK has shown that one dose of Pfizer’s vaccine has an effectiveness of up to 66% and Germany extended its restrictions until the 7th of March. In US business results, Under Armour, Coca-Cola and General Motors beat expectations, Tyler Technologies released disappointing earnings.
What we expect for today
European indices would open flat with some bearish bias. Currently, S&P futures are up +0.15% (the S&P 500 closed practically unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 21.99). Asian markets (China, Japan and South Korea) are closed for holiday although Hang Seng futures are climbing slightly.
Today in the US we will learn weekly jobless claims and in Mexico the interest rate meeting and December’s industrial output. In US business results, Pepsico, Walt Disney and Kellogg, among others, will release their earnings. In debt auctions, Italy (€9 B in bonds due 2024, 2028 and 2041).


COMPANY NEWS

ARCELOR MITTAL: Better results than expected. Positive qualitative guidance and strong share buyback. BUY
The results clearly beat expectations in both EBITDA (+86.6% vs. 4Q’19 vs. +49.0% BS(e) and +59.1% consensus) and Net Profit. This was thanks to the better price and volumes performance in Europe (22% EBITDA) ACIS (15% EBITDA) and Mines (42% EBITDA). Net debt came in at US$ 6.4 Bn (vs. US$ 7 Bn expected) thanks to the better working capital performance. The guidance’21 is qualitatively positive on the global level, with apparent demand recovering sharply (+4.5%/+5.5%). The company has announced a resumption of the dividend with US$ 0.30/sh. (1.5% yield), and although it is below expectations (US$ 0.45/sh. BS(e)), it will come with a share buyback totaling US$ 1.22 Bn in 2021 (5.8% market cap). We expect these announcements to be received warmly.

MAPFRE. FY2020 results below expectations due to impairments. BUY
The company obtained € 526.5 M of Net Profit’20 (-15% vs. expectations), meaning 4Q’20 Net Profit of €~75 M vs. € 170 M expected, due to € -132 M of goodwill impairments (vs. €~50 M BS(e)). Excluding this, the operating performance has followed the same trend of recovery seen in 9M’20, with premiums falling -8% in 4Q’20, in line with expectations, and with better Combined Ratio performance (94.8% vs. 95.4% expected). By regions, the Net Profit performance was in line with expectations in Spain (-10% vs. 2019) and LatAm (+15%), slightly better in the international business (US and Eurasia, +14% in Net Profit) and with a better performance of reinsurance (€ 16.8 M of Net Profit vs. around € 3 M expected). We expect a neutral/slightly positive market reaction. BUY