Standard Profil - Waiting for OEM assistance

All,

Please find our updated analysis here.

In the absence of an agreement with the OEMs, it is very difficult to come to a concrete view on Standard Profil. As a reminder, Q4 guidance, given end of November was for a range of €8-18m, the delta the level of compensation potentially to be received from OEM negotiations. The outcome for the quarter was €11m but no negotiations with OEMs have concluded. There is no indication of how much of the €10m delta will be accrued to Standard Profil, but management are confident that negotiations will have completed by the timing of Q1 results, due end of May.  

We maintain our 5% long position at current prices but acknowledge the bonds, in the high 50’s/low 60’s range is in no man’s land. We maintain our view that the business will continue to improve as the Company continues to take costs out, but with the OEM negotiations still overhanging actual results, it is impossible to be more constructive.  

Liquidity:

- Credit Suisse are the provider of Standard Profil’s RCF, and therefore the Company took the decision to draw down the full €30m available in Q1.  

- In addition, in April (Q2), the equity sponsor, Actera, provided a further €10m via an equity cheque. The Company states this was done to aid negotiations with the OEMs but is not as a result of a request from the OEMs. 

- The drawdown of the RCF and the equity cheque eases liquidity concerns in the near term.  

Role of the OEM: 

- We calculate that the cost of Standard Profil’s product is c. €70-80 per vehicle to the OEMs and therefore an extremely small portion of the overall cost of the OEMs manufacturing costs. Standard Profil have sole supplier agreements with the OEMs and therefore there is limited chance of OEMs switching suppliers in the short term.

- It is visible from the recent contract wins, especially in the electric vehicle space, OEMs continue to Standard Profil as a viable supplier.

- Therefore, we would expect OEMs to provide “support” to Standard Profil if required.

- However, the delay in reaching an agreement is starting to concern us.

Operational Leverage:

- Our model shows the significant operational leverage that Standard Profil operate under. We envisage revenue to be c.€450m for FY23 versus the Company’s guidance of above €480m. The delta, driven by higher OEM production levels would result in higher margins, given the operational leverage.  

- We have expected an uptick in OEM production levels for the last couple of quarters, especially given the order book wins the Company has reported recently. 

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009
www.sarria.co.uk