Antolin - comment

The company reported Q1 2024 results which confirmed our negative view. Revenues declined by 10% to €1.04 billion and below our estimate of €1.2 billion as revenues from Product Systems declined due to end of projects in North America which were offset by growth in Technology Solutions. Q1 2024 EBITDA beat our expectations by €10 million to €83 million driven by improving growth from Technology Solutions in China and Mexico and cost cuts. Balance sheet and credit metrics declined with liquidity at €369 million and a decline in cash to €241 million which was driven by working capital seasonality. The company burnt €85 million of cash was higher than our expectations of €34 million which drove net leverage up sequentially to 3.2x. In terms of outlook, the company looks to achieve sequential improvement in the upcoming quarters with the Transformation Plan on track. The big negative surprise for us was the strong decline in the Product Systems segments which highlights the inherent lumpiness of the revenue model. The growth in Technology Solutions was a step in the right direction but not enough to offset the weakness and cost cuts can achieve so much. There is still execution risk with this story which is not reflected in the current trading levels of the bonds and leaves us on the sidelines.