Antolin

All,

The reporting was much as expected.

We have recently been eyeing Antolin for a short. S&P have the company at B+ with stable outlook and Moody’s at B1 with negative outlook. Both have downgraded the company at the turn of the year.

Margins have been eroding since the acquisition of Magna Interiors in 2015 and now stand at ~7%. Margins are however set to further erode on geographic and customer mix as well as operating inefficiencies in more than a hand full of its plants. 

The company today guided to stable leverage through the next year. Given the turnaround has yet to be performed, we are intuitively sceptical. 

Moreover, 60% of its turnover is made with only 5 clients. Two of which specifically, VW and Tata / Jaguar Land Rover are reported to have trouble moving inventory / to be cutting costs. Yet none of the other three clients is doing much better. The company is also going through a period of prolific model launches and thus is spending even more on CapEx.

The company is ~3x levered, has no material maturities until 2022, has over E300m in cash and E200m in undrawn facilities. However, it is also normalised FCF negative, the turnaround has yet to begin and the environment is not supportive. Add to that the risk of Brexit and US tariffs. 

We don’t believe much of the notes have travelled yet. Yields were in the high single digits, but due to the long duration, bonds had been hovering around the 80c/E mark.

Wolfgang