KME – first impression of Q2 20 numbers
All,
KME’s reported numbers may look decent at first sight, but the details on cash flows, working capital and inventory price variations remain a key part of the story. The continued resilience of the EBITDA despite the sharp decline in Net Added Value (NAV), and the significant reduction in capex, are positive but need to be investigated for their continued sustainability at the new levels. The cash outflows from working capital variations need to be explored further. Even in the most benign of the interpretations of one-off cash flows and discontinued operations, KME is still not covering its interest payments once we add back working capital movements.
At this point only the slides are available. The financial report and the call details should be released soon.
Key takeaways:
- Sales down -12% yoy in 1H 20.
- EBITDA up 3% yoy in 1H 20, thanks to a reduction in both personnel costs and other consumables. Note that a significant portion of it would probably reflect the benefit from furlough measures and other temporary support schemes.
- Capex reduced significantly to EUR9am in 1H 20 from EUR26m in 1H 19.
- Working capital saw a EUR9m outflow in 1H 20. The company blames the price effect of the decline in copper prices, but the amount suggests that the period of consistent reduction of working capital requirements is coming to an end for KME.
- Utilization of the KME Mansfeld inventory facility went up slightly to EUR80m in Q2 20, a EUR4m increase in the quarter. The utilisation of the main KME inventory facility has remained constant.
Please feel free to reach out if you would like to exchange ideas on the name.
Juliano
___________________
Juliano Torii
2 Stephen Street
London W1T 1AN
E: jtorii@sarria.co.uk
M: +44 794 73 56 163 (preferred)
T: +44 203 744 7055