EU CONSUMER STAPLES: Suedzucker; S&P stays unch
(SZUGR; Baa2 Neg/BBB-/NR)
After most recent guidance cut sees FY26 EBITDA of €530m (co guiding to €470-570m) leaving net leverage at 5.3x (prev. expectation 4.5-4.6x). Expects cash flows net of dividends to turn slightly negative this year.
Will still stay unch for now despite leverage well above 4.0x threshold as it sees earnings recovery and returning positive cash flows net of dividends in FY27 on:
- rebound in sugar EBITDA
- co's FY guidance is based on a recovery in sugar prices starting in the next marketing year (from Oct '25)
- stable contribution from special products and fruits and
- group wide cost cutting
It also sees potential reduction in capex from current levels (elevated at €500-600m in recent years) and potential asset sales within special products if required.
Equities are at GFC lows, sub €2b market cap now vs. debt load of €2.7b. It has ridden similar sugar cycles in the past - but on lower debt load. Bonds are retail denominated and trading flat to SKFP's unrated retail 30s who is going through similar earnings issues. Retail Metro 30s a ceiling for levels.
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EQUITY OPTIONS: Commerzbank longer dated Put Options
- CBK (18/12/26) vs (17/12/27) 32p, trades for the 2027 2.14 in 9.5k.
There are no OI in those strikes, new Positions.
GBP: GBP/USD Set to Test Key Resistance
Latest stretch higher in GBP is putting GBP/USD on course for a test of the major resistance we've flagged at 1.3589: clearance here puts prices at the highest since mid-July fully reverses the fade into the early August lows.
- GBP has been the primary beneficiary of the USD-led weakness in recent weakness - with the contrast between BoE and Fed policy cemented on the hawkish BoE cut last week, limiting the pricing of UK rate cuts into year-end, and through to the Autumn Budget - the next major macro event in the medium-term (likely late October/early November).
- Growth numbers due tomorrow are expected to show a sharp slowing in quarterly growth to 0.1% from 0.7% in the prior quarter - but an upside surprise here would catalyse a move north of the current range and extend the spell of not-as-bad-as-feared UK economic data.
- The downtick in front-end implied GBP vols coincides with improving net risk reversals - likely implying a cheapening of put vol that covers both the Sept and Nov MPC, priced for a cumulative 11bps of cuts across both meetings.
- On GBP, Rabobank write that they see GBP's recent better tone running out of steam, with the BoE cutting in November - with this week's growth data possibly confirming stagflationary fears.
SOFR OPTIONS: SFRU5 96.00/96.125/96.25 Call Fly Blocked
Latest block trade lodged at 06:00:30 NY/11:00:30 London
- SFRU5 96.00/96.125/96.25 call fly 4K blocked at 1.0, looks like a buyer vs. 95.955 (10% delta).
