Antolin - the road ahead
All,
Some mixed signals from Antolin on the call.
Liquidity:
- On the one hand the liquidity situation looked better than anticipated as despite the Sales trough falling into April, much of the WC related cash outflow falls into May. Overall, however, the company remains on track wrt. to NCF of E-150m in Q2.
Disruption:
- On the other hand however, management report that client production cuts have been deeper and have lasted longer than forecast a month ago. Also the company’s assessment of rebound is now shallower than it believed in April.
- Revenue / volume estimates as % YoY:
- April: Only E43m
- May: E196m (50%) - Currently 80% of worldwide facilities are open again (100% in China, 92% in Europe and 83% in the US. Mexico is expected to open early June, bringing Nafta to only 57% so far). European facilities however tend to work more shifts already.
- June: E324m (70%)
- July: 80%
- The company generally has daily flexibility in this period to bring employees back to work or not.
- The troubles befalling the US manufacturing sites Spartanburg, Alabama and soon also Kentucky will have put their problems behind them and will be - generating positive EBITDA this year.
Flexibility:
- In France, furlough schemes have been extended too October.
- In Spain, law makes reference to Force Majeur, which allows for a little less flexibility as management still has to consult works council / unions, but good.
- In Germany, the Kurxarbeit scheme is more limited and fledibility is not as great.
- Overall, management is pleased with the flexibility on fixed costs. The current plan is for 19 plant closures this year and another 10 next year.
Trends confirmed:
- Antolin confirm the trend among premium manufacturers to be ramping up much more aggressively than industry average. Thus in their European plants, VW and Mercedes are already working with three shifts again. In the US (behind Europe in the Corona easing), Ford and GM are now at one shift and Fiat are well behind. BMW have started quickly, but have had to halt production in some areas due to bottlenecks in the supply chain.
- Thus far, management have been able to largely insist on prompt payment from OEMs and are keen not to offer price reductions, which in auto supply tend to be a one-way ticket. The situation is mirrored by the company’s own suppliers.
Financing:
- The banks have approved a covenant postponement by one year to June 21. In the interims period the company merely has a liquidity test (includes cash and lines) of E150m. Current liquidity stands at E530m and is not expected to fall below 400m over the course of Q2. Qe is expected to be positive due to WC.
- The company only faces a remaining E50m of maturities this year and average debt maturity is close to 4 years.
- As part of its covenant reset, the company also received carve-outs for E200m of incremental credit lines, half secured, half unsecured.
- Currently advanced negotiations for government-backed loans, however, total less than half that amount. There is a chance that in line with precedent elsewhere, those loans will be unsecured, but we assume a dilution at the secured level - to be safe.
- The company is thus far operating above Management's "bear case" presented to banks for the covenant reset.
So overall liquidity seems assured., fixed costs are controllable during ramp-up and unions seem to have signalled a degree of understanding wrt. forthcoming redundancies.
Wolfgang