SGL – Hangover from low client activity in 2020 slows Q1 recovery
All,
Please refer to our unchanged analysis here.
Recovery in volumes and profitability is proving slower than we originally hoped but we do expect a stronger 2H21 with orders picking up as the year progresses. Our view remains that SGL is well placed to benefit from increased activity and its cost reduction program. The company ended the quarter with EUR168m of liquidity, which will be sufficient.
Outlook:
- While management affirmed its FY 21 guidance, we are modestly reducing our expectations for 2021.
- Given the easy comps LTM EBITDA will continue to rise quarter by quarter and with only modest cash outflows from working capital, we expect leverage will drop quarter over quarter for the rest of the year.
Precursor:
-The Lavradio plant still only has 2 of its 12 production lines dedicated to carbon fibre precursor. The company confirmed that is will not switch from textile to precursor until the quality is “right”. However, if this is not imminent and after 9 years of owning this unprofitable plant, it is hard to see it ever substantially improving.
Please reach out to discuss,
Aengus
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E: amcmahon@sarria.co.uk
T: +44 203 744 7055