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IBERIAN DAILY 27 JULY + 2Q’23 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA ENERGÍA, ARCELORMITTAL, CELLNEX, ENDESA, FERROVIAL, NEINOR HOMES, NH HOTELES, REPSOL, TALGO,TELEFÓNICA, UNICAJA.

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 2Q’23 results to be released over the coming days in Spain.

The Fed did not make it clear whether it is ending the rate rise cycle
As expected, the US Fed raised rates by 25bps up to 5.25%-5.50%, at record highs from the past 22 years. Later, J. Powell stressed that no decision has been made about September and that it will depend on the data to be released. In the Euro STOXX, Real Estate, followed by Travel&Leisure, led the gains, with Consumer Goods (severely hit by luxury groups) and Technology posting the biggest losses. On the macro side, in the euro zone, June’s M3 rose less than expected. In the US, negative data in the real estate sector, with construction permits slowing down in line with expectations in June, whereas housing starts dropped more than expected. In US business results, Meta, Coca Cola and Boeing came in below expectations, Hilton in line.
What we expect for today
European stock markets would open with gains of +0.50% thanks to the rally of the technology sector. Currently, S&P futures are up +0.27% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US fell (VIX 13.19). Asian stock markets are climbing (China’s CSI 300 +0.27%, Japan’s Nikkei +0.78%).
Today in the euro zone the ECB will hold its interest rate meeting and in Mexico we will learn June’s unemployment rate, and in the US weekly jobless claims and the 2Q’23 GDP. In US 2Q’23 Results, Amazon.com, Mastercard, McDonalds’s and T-mobile, among others, will release their earnings. In debt auctions: Italy (€ 9.75 Bn in bonds due Aug’28, Oct’28, 2032 and 2033).


COMPANY NEWS

ARCELORMITTAL, BUY
The results beat expectations in 2Q’23 EBITDA (US$ 2.61 Bn vs. US$ 2.51 Bn BS(e) and US$ 1.86 Bn consensus), and better than 1Q’23 on the net level, favoured by the price spread, which offset the lower volume of deliveries. On the guidance level, the company has lowered its forecast for apparent consumption from +2%/+3% ex-China to +1%/+2% in view of a more conservative forecast for its main markets (US, Europe and Brazil). Positive results on the operating level that, in view of the comments that demand is lower in its main three regions (which account for >85% of EBITDA), should be well received. In any event, we think the key for the future will be the price spread (especially the company’s ability to manage costs), where we expect more details to be given in the results conference call (15:30 CET).

NEINOR HOMES, BUY
The P&L figures are weak but not representative of the full year, as most deliveries take place in the second half of the year. Sales € 181 M (-53.5% vs. -54.2% BS(e)); EBITDA: € 22 M (-63.5% vs. -68.5% BS(e)). The company reiterated its full-year guidance. Shareholder remuneration. The company confirmed it will pay several dividends , buying back shares for € 126 M in total in 2023 (17% of its market cap; 10% in dividends and 7% in share buyback). We believe this is good news as we understand that the market was not 100% considering this aggressive remuneration plan. Although the delivery figures are weak we believe that the approval of the remuneration plan is good news, widely offseting this data.

NH HOTELES, SELL
The 2Q’23 results were practically in line with expectations in sales (+21.8% vs. +19.3% BS(e) and +16.7% consensus) and in EBITDA (+17.6% vs. +17.2% BS(e) and +18.1% consensus), although margins (33.7% vs. 34.3% BS(e), 35.3% consensus and 37% in 2Q’19) came in slightly below what we expected (-60bps and -160bps vs. consensus). 2Q’23 NFD reached € 246 M (€ -94 M vs. 1Q’23, vs. € -100 M BS(e) and € -47 M consensus), meaning 0.4x NFD/EBITDA LTM (vs. 0.6x in 2019). The liquidity position remains strong at € 573 M. Despite being spectacular results, we do not think they will have a significant impact, given the company’s current situation of low liquidity with free float below 5%, and especially the fact that this makes it more difficult for MINT to make a delisting tender offer in the short term.

REPSOL, BUY
2Q’23 Results lightly above the consensus expectations and BS (e) in adjusted Net Profit, as this had been cut after the announcement of the 2Q’23 trading statement (around -5% in one month). Thus, the adjusted Net Profit totalled € 827 M (-61% vs. 2Q’22 and -67% consensus, -61% BS (e)). By divisions, Upstream would fall to € 410 M vs. 1Q’23 (-57% vs. 2Q’23) due to lower prices, higher production costs and amortisations and depreciation of the dollar (partially offset by higher volumes, exploration costs or taxes). In Industrial, Net Profit would fall to 344 (-71% vs. 2Q’22) and Commercial and Lower Carbon are in line at € 160 M (+49% vs. 2Q’23). The operating cash generation totalled € 1.7 Bn and NFD € 797 M (€ -83 M vs. 1Q’23). Thus, leverage (NFD/(NFD+net equity) came in at 2.8% vs. 3% in 1Q’23. As for shareholder remuneration, the company announced a buyback programme (already expected) of 50 M shares (3.4% capital) and a capital reduction of 60 M shares before the end of the year. After this reduction announced, in 2023 it would have reduced its share capital by 110 M (8.3% capital). We expect a positive market reaction following its poor performance in 2023 (-7% vs. +16% IBEX). In the Conference Call (13:30 CET), we will pay close attention to: (i) the guidance for the 2H’23, particularly in upstream bearing in mind the sharp drop in gas prices, (ii) potential acquisitions taking into account REP’s financial muscle.

TELEFÓNICA, BUY
The 2Q’23 results beat expectations in sales (+0.5% vs. consensus) and EBITDA (+0.6% vs. consensus) due to Brazil (already known). On the domestic market, sales are slightly below the consensus (-0.1% vs. consensus), but in line in EBITDA. We highlight the acceleration in retail service revenue growth (+1.9% vs. +1.7% in 1Q’23), thanks to the improved ARPU (+1.7%). As for FCF, the figure is clearly above expectations (€ 842 M and € 810 M BS(e) and € 758 M consensus). The company has raised its guidance’23 to +4% in sales and +3% in EBITDA (vs. low-single-digit previously), which is slightly above the consensus. We expect a slightly positive reception today, after the stock has fallen -33% vs. the IBEX in 2023.

UNICAJA. Better results in NII (+4% vs. consensus) that are passed on to Net Profit (+12% vs. consensus). BUY
Positive surprise in NII (+9.7% vs. 1Q’23 vs. +4.6% BS(e) and +5.2% consensus) that is passed on to Net Profit (+234.3% vs. +215.9% BS(e) and +198.3% consensus). Fee revenues, OPEX and provisions were very much in line with expectations. Smaller drop in lending than expected (-0.7% vs. 1Q’23). Solid performance in credit quality, with CoR at 30bps vs. 26bps in 1Q’23 (vs. 35bps expected and guidance’23 of 30-35bps) and a stable NPL ratio of 3.6%. Solid performance in capital, as expected, with CET1 improving to 13.8% FL vs. 13.47% in 1Q’23. No surprises in liquidity ratios: 78.6% LTD and 284% LCR vs. 78.8% and 298%, respectively, in 1Q’23. We expect a positive reception. Conference call at 11:30 (CET).