EU CONSUMER CYCLICALS: Electrolux; 2Q (to June) results
Jul-18 12:42
(ELTLX; NR/BBB Neg) (equities -16%)
Sales growth back to subdued levels while cost savings are being met by headwinds including tariffs and FX). The WC swing is sizeable and will impact the rate of deleveraging (from earnings growth). Equity analyst seem concerned with competitive pressures on headline growth expectations (consensus was expected +5% organic growth this year). We will circle back on levels.
- 1Q sales organic +2%, net of divestments (-1%) and FX (-8.4%) it was €2.8b/-7.5%y/y
- Organic: NA +4% and returned to profitability. EMEA was -0.5% but on margin expanding +130bps while LATAM +2.6% but with significant FX headwinds (-15%). Margin contracted 130bps there.
- Group EBIT margin 2.5% (+130bps), +170bp benefit on cost savings offset nearly entirely by -160bp in 'external factors' - which it counts most cost side related inflation under (including tariffs).
- NA is a 1/3 of group sales, it has disclosed in past only 20% of US sales sourced from Asia (mostly China), with some sourcing outside of Mexico (but all products are exempt under USMCA). Rest domestic.
- A heavy WC Swing to -SEK2.3b (-€205m) swung FOCF to SEK -741 (from SEK +1.2b last year). It says part of the cash flow pressure is on SEK500m (€45m) fine paid to antirust case in France. The WC increase was on Tariffs (paying higher prices, yet to receive), but also on a inventory increase (+18% y/y) on weaker demand.
- g/n debt of €3.9b/€2.9b, leaving it 4.7x/3.5x levered, reiterates IG target. It says it has prefinanced all maturities this year - yet to roll of includes SEK 3b (€270m) in local currency bonds.
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Jun-18 12:36
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Jun-18 12:34
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- Iran retains the capacity to strike US assets in the Middle East, roil oil markets, and disrupt commercial shipping routes.
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