EM CEEMEA CREDIT: AEFES: 1Q25 results, weak margins and FCF
May-08 06:44
Anadolu Efes (AEFES: -/BB+neg/BB)
1Q25 results, weak margins and FCF
- Accounting changes, weak profitability and cash flow generation, we think the results are not supportive for credit profile. Revenues of TRY44.35bn vs expec of TRY47.52bn. The big change was to the Beer business, where the Russian business was deconsolidated and like for like comparison’s are not valid. Soft drink’s topline was -3.8% QoQ at TRY36.12bn.
- EBITDA in the Beer business was negative while margins in the soft drink business declined 3.44ppt to 12.95%. Investment activity income was TRY3.11bn, which we assume is related to the accounting change of the Russian business and resulted in net income beating at TRY1.73bn vs estimate of TRY543mn.
- Cash flow generation was weak with operating cash flow consumption of TRY7.14bn and FCF consumption of TRY11.1bn.
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USD: Testing broader early lows
Apr-08 06:44
- The Dollar was trading in the red against G10, and is seeing some broader early downside continuation, at new intraday lows against the EUR, GBP, SEK, MXN, CHF, TWD, TRY, PHP, NZD, and the NOK.
- The Aussie was and still is the best early performer, albeit off its best levels.
- AUDUSD fell to its lowest level since March 2020 Yesterday, as Equities continued to plummet, but some of the recovery in Risk has provided a short term base for now.
- Small resistance in AUDUSD falls to 0.6077, but most market participants will look at 0.6127, yesterday's high initially.
BONDS: Focus on how long-end supply is digested
Apr-08 06:41
- Given the steepening in yield curves globally there is an increased focus on the long-end and there are a number of events to watch over the coming days.
- Overnight we saw very poor demand metrics for a 30-year JGB auction. Our Asia team noted that the low price came in at 100.00, falling short of dealer expectations according to a Bloomberg poll. The cover ratio declined to 2.96x from 3.50x, while the auction tail widened significantly to 0.75 - the largest since 2023 - up from just 0.12 previously, all pointing to noticeably weaker demand.
- Today the EU is due to tap the 2.50% Oct-52 EU-bond as part of a dual-tranche syndication while the UK is due to hold a 30-year 4.375% Jul-54 gilt auction this morning. Both will be watched to see if there is any recovery in long-end demand and we note in particular that we will be watching how much of a concession we get going into that 30-year gilt auction.
- This all comes ahead of Thursday when we will see a 30-year UST auction. This does seem an eternity away at the moment given the fast paced nature of negotiations headlines and markets, but it will come around soon enough.
- Given the global integrated nature of the curve steepening, we think it is worth watching any long-end demand metrics at present.
CHINA: Country Wrap: State Funds to buy Stocks
Apr-08 06:35
- News that China's state backed funds are planning to step in to buy markets and stabilize things gave bourses a boost today as the likelihood of policy intervention grows. Key state owned fund China Reform Holdings said it will invest $10bn in shares to support the market. (source: MNI – Market News)
- Of the 27 Chinese cities that logged a gross domestic product of over CNY1 trillion (USD136.8 billion) last year, industrial production increased by more in 19 of them compared with the national level in the first two months of the year. The industrial output of enterprises above the designated size, which refers to those with an annual revenue of at least CNY20 million (USD2.7 million), in Xi'an, Hefei, and Yantai rose 16.4 percent, 13.4 percent, and 10.2 percent, respectively, in January and February from a year earlier, according to official figures. (source Yicai)
- China's major bourses all rallied today with the Hang Seng better by +0.35%, CSI 300 +0.60%, Shanghai +0.50% and Shenzhen the outlier down -0.25%.
- CNY: Yuan Reference Rate at 7.2038 Per USD; Estimate 7.3297
- Bonds: a giveback in bonds today with the CGB 10YR higher by +1.5bp to 1.65%
