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FCC: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
Sales: € 1.626 Bn (+2.6% vs. -4.4% expected);
EBITDA: € 327.9 M (+17.3% vs. -14.9% expected);
EBIT: € 205.5 M (+21.2% vs. -32.3% expected);
Net Profit: € 98.6 M (-5.3% vs. -62.7% expected);
9M'20 vs. 9M'19 Results
Sales: € 4.448 Bn (-2.8% vs. -5.3% expected);
EBITDA: € 761.5 M (+2.8% vs. -9.4% expected);
EBIT: € 393.4 M (-5.0% vs. -26.9% expected);
Net Profit: € 174.5 M (-25.1% vs. -50.8% expected);

The 3Q’20 results came in above expectations thanks to one-offs in Cement, with core businesses performing in line. The quarter’s EBITDA came in far above expectations (+17.3% vs. -14.9% BS(e) thanks to a good performance in all businesses, and especially the cyclical divisions. Specifically, Cement (22% of EBITDA) obtained € 72 M of EBITDA on the quarter vs. € 16 M BS(e) thanks to CO2 rights sales totalling € 41 M (unexpected) and Construction (8% of EBITDA) registered margins of 6% vs. 3.5% BS(e). In any case, we highlight that, excluding the one-off from the sale of CO2 rights in Cement, consolidated EBITDA would have increased by +2.6% vs. -14.9% BS(e). Net Profit fell by -5.3% vs. -63% BS(e) thanks to better performance on the operating level.
There were no surprises from net debt, which was reduced by -14% to € 3.08 Bn (3.1x NFD/EBITDA vs. 3.6x in 2Q’20), slightly above our estimates (€~2.9 Bn; 3.1x NFD/EBITDA), which would be largely due to the deconsolidation of Cedinsa’s debt totalling € 691 M (the sale of which was agreed last month). Excluding this effect, NFD would have risen by +5.8% in 3Q’20 (vs. +1% BS(e)).
In short, the 3Q’20 results are clearly above expectations on the operating level, but mainly due to the solid performance in the divisions with the smallest weight on our valuation (Construction and Cement account for 6% of EV). due in part to one-off impacts, which would explain the neutral reception (+0.4% vs. IBEX after having gained +2% at the opening bell). In any event, we highlight the positive underlying performance in core businesses (Services and Water), which performed in line with expectations, leading us to keep our positive view on the stock. We reiterate our BUY recommendation. Target Price: € 12.80/sh. (upside 67.32%).