EU TRANSPORTATION: TRANSPORTATION: Air France-KLM (NR, BB+, BBB-)
AFFP has been very open in its roadshow about weak margins vs. comps including one that came to primary yesterday; EBIT at 5.7% to end FY23 vs. IAG at 12% and Lufthansa at 7.6%. There are a couple of caveats we wanted to add to roadshow figures;
- FOCF was €140m for Q1 which was weak for airlines that benefit from Q1 WC seasonality cash boost. It's pointing to a €730 one-off drag, including €120m in deferred social charges and wage taxes. Company noted it has €1.6b left in deferred charges out to 2027 that may continue a one-off drag.
- Net leverage is quoted running in low 1s (1.3x to end in March) but this is on a sizeable cash pile of ~€7.5b. Total debt is ~€13b and leaves gross leverage at ~3.3x. It treats its quasi-equity/hybrid instruments (~€3.5b) as full equity under IFRS & hence excluded in above figures. It is guiding to refi-ing this into normal debt over "years to come".
- FCF is expected to be negative this year by analyst. Capex is running high for capacity expansion. No FCF guidance, but net capex guidance is at €3b vs. consensus for cash flow from operations of €3.1b.
- Among the light guidance we did get was non-fuel unit costs rising 1-2%yoy in FY24 - it implies flat to negative levels later this year (base effects will help as will strike/one-offs fading). Failure to see this trend would be clear negative & could see another round of analyst revisions down. Cargo is similar x-factor; company expects it to normalise but is volatile & no forward bookings to base guidance off.
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USDCAD TECHS: Heading North
- RES 4: 1.3977 High Oct 13 ‘22 and a key M/T resistance
- RES 3: 1.3899 High Nov 1 and a key resistance
- RES 2: 1.3855 High Nov 10 2023
- RES 1: 1.3772 High Apr 12
- PRICE: 1.3764 @ 15:52 BST Apr 12
- SUP 1: 1.3576 20-day EMA
- SUP 2: 1.3478/20 Low Apr 4 / Low Mar 8 and the bear trigger
- SUP 3: 1.3359 Low Jan 31 and key S/T support
- SUP 4: 1.3343 Low Jan 12
USDCAD bulls remain in the driver’s seat and this week’s break higher confirmed a resumption of the current uptrend. Resistance and congestion at 1.3614, the Mar 19, 22, 25 and 29 high, has been cleared This paves the way for gains towards 1.3855 next, the Nov 10 ‘23 high. Moving average studies are in a bull-mode position, highlighting a clear rising trend. Initial firm support lies at 1.3478, the Apr 4 low.
MNI: DALY SEES 'NO URGENCY TO ADJUST THE POLICY RATE'
- DALY SEES 'NO URGENCY TO ADJUST THE POLICY RATE'
AUDUSD TECHS: Approaching The Bear Trigger
- RES 4: 0.6729 High Jan 12
- RES 3: 0.6708 61.8% retracement of the Dec 28 - Feb 13 bear cycle
- RES 2: 0.6668 High Mar 8 and the bull trigger
- RES 1: 0.6560/6644 50-day EMA / High Apr 9
- PRICE: 0.6467 @ 15:50 BST Apr 12
- SUP 1: 0.6464 Low Apr 12
- SUP 2: 0.6443 Low Feb 13 and the bear trigger
- SUP 3: 0.6412 76.4% Fibonacci retracement for Oct - Dec upleg
- SUP 4: 0.6339 Low Nov 10
AUDUSD remains vulnerable following Wednesday's sell-off and Friday’s weakness strengthens a bearish theme. A continuation lower would signal scope for a test of key support and the bear trigger at 0.6443, the Feb 13 low. Clearance of this level would highlight an important short-term technical break. Key resistance is unchanged at 0.6668, the Mar 8 high. A reversal higher and a break of this level is required to signal a potential reversal.
