KME - comment
The completion of the sale of the Wires business, announced in November 2018, sees more liquidity coming into KME. The company continues to shed volumes as it struggles to fund its working capital requirements and this €20m business sale doesn’t move the funding needle substantially. Wires 2021 revenue was €87m, equating to around 8.2kt (2%) of volume. We calculate that around 1kt (of inventory will exit the business which equates to a further €9.5m in cash. That cash will have to be recycled into working capital (along with the €20m) to support volumes in the core copper business. We exited our short last after KME decided to repay bonds rather than fund working capital with the Specials sale proceeds. However, we see KME as having no option but to continue to sacrifice volumes until the copper price falls an event we do not see as imminent.