EUR 100.00 For Business Accounts Only

ENCE: 9M’19 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results
Sales: € 200.9 M (-8.4% vs. -11.1% BS(e) and -12.6% consensus);
EBITDA: € 34.2 M (-56.7% vs. -56.3% BS(e) and -55.6% consensus);
Net Profit: € 2.8 M (-93.2% vs. -94.0% BS(e) and -89.2% consensus).
9M'19 vs. 9M'18 Results
Sales: € 587.1 M (-5.3% vs. -6.2% BS(e) and -6.8% consensus);
EBITDA: € 126.5 M (-40.8% vs. -40.6% BS(e) and -40.4% consensus);
Net Profit: € 27.8 M (-69.7% vs. -70.0% BS(e) and -67.9% consensus).

The company released at yesterday’s closing bell poor 3Q’19 Results although quite in line with expectations in EBITDA. Thus, sales fell -8.4% vs. 3Q’18, faring slightly better than expected (-11.1% BS(e) and -12.6% consensus) thanks mainly to the higher sales volume. The 3Q’19 EBITDA came in at € 34.2 M, meaning a sharp fall vs. 3Q’18 (-56.7%), which would be in line with expectations (-56.3% BS(e) and -55.6% consensus), although margin would be slightly below (17.0% vs. 17.7% BS(e) and 18.3% cons) due to worse margins in the renewable division. We stress the better-than-expected performance of cash cost (€ 376/t on the quarter vs. € 380/t BS(e)), offset by higher discounts (34% vs 33% BS(e)). Net Profit falls -93% vs. 3Q’18 (in line with expectations) to € 2.8 M.
Net debt was in line with expectations, coming in at € 519 M (vs. 305 in Dec’18; 2.5x EBITDA in the past 12 months) as a result of the investments accomplished over the period (€ 221 M) and the impact from IFRS (€ 53 M, as expected).
Lastly, the company announced it keeps its shareholder remuneration policy of a 50% payout of Net Profit although after the payment of the first interim dividend (in September’19 for 50% of the 1H’19 Net Profit), the AGM will decide on March’20 on the final dividend based on 2H’19 Results, not applying the approval of a second interim dividend (as it was usual thus far) since the second half of the year is expected to end with an negative Net Profit, and therefore the final dividend will be zero, with the annual pay-out exceeding 50% (~80% BS(e); yield 1.5%).
Despite the fact that the results were quite in line with expectations and the stock has underperformed the IBEX by -50% thus far in 2019, we do not rule out a negative or slightly negative market reception, as the drop in EBITDA is highly significant (-57% vs. 3Q’18), and the renewables division has performed worse than expected. Conference call at 16:00 (CET). BUY. T.P. € 4.42/sh. (upside +29.09%).