Klockner Pentaplast - comment

We have decided to sell our 2% position in the senior secured notes at 96.5 giving us a nice profit of ten points in five months as we feel the upside is limited given the unknown around refinancing and disappointing Q3 results (detailed below).  The company reported Q3 2024 revenues of EUR 459 million, well below guidance, and adjusted EBITDAR of EUR 69 million, which was right on target. Net sales for the Pharma, Health & Protection and Durables (PHD) at EUR 245 million (below Sarria estimates at EUR 291 million) declined by 3% due to lower pricing from raw materials contract terms which were offset by volume gains. Food Packaging Q3 revenues were EUR 214 million (below Sarria estimates at EUR 269 million) from a volume decrease in rigid films offset by an improving Flexible and Tray business and pricing lag. PHD EBITDA was EUR 50.1 million (slightly below our estimates at EUR 54 million) due to pricing headwinds while Food Packaging EBITDA was EUR 29.6 million (below our estimates of EUR 38 million) from lower volumes and delayed pass-through of higher resin costs. Liquidity was 124 million in Q3 with company drawing down 48 million on their RCF.  

We had expected a stronger quarter as per guidance from management which would have facilitated a refinancing (we understand conversations are occurring with investors as we speak) but perhaps we will learn more on the call on the 12th December…