PIERER Mobility — Proactive mitigation measures

PIERER Mobility (AV: PMAG)

Last close As at 21/12/2024

81.00

1.00 (1.25%)

Market capitalisation

2,738m

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Research: Industrials

PIERER Mobility — Proactive mitigation measures

Faced with an unprecedented set of global circumstances arising from the coronavirus pandemic, management has taken pre-emptive action with respect to potential supply chain issues. Of course, demand effects are more difficult to predict. The good news is that Stefan Pierer, the CEO, can apply his experience from managing the financial crisis, when the group saw volumes fall by around 25–30%. Any forward-looking estimates need monitoring, but we are cutting our volume expectation across the group by 15%, with a drop-through impact on EBITDA of €45m.

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Written by

Industrials

PIERER Mobility

Proactive mitigation measures

Pandemic response

Automobiles & parts

20 March 2020

Price

€27

Market cap

€607m

€/CHF1.05

Net debt (€m) at 31 Dec 2019

396

Shares in issue

22.5m

Free float

39%

Code

PMAG

Primary exchange

SIX Swiss Exchange

Secondary exchange

Frankfurt Stock Exchange

Share price performance

%

1m

3m

12m

Abs

(47.9)

(49.1)

(54.1)

Rel (local)

(33.2)

(38.7)

(50.2)

52-week high/low

€61.5

€26.7

Business description

PIERER Mobility (previously KTM Industries) is a leading manufacturer of powered two wheelers, focusing on premium motorcycles and two-wheeled electric vehicles. With its well-known brands – KTM, HUSQVARNA and GASGAS – it is the largest sports motorcycle manufacturer in Europe.

Next events

FY19 results

31 March 2020

AGM

June 2020

Analyst

Andy Chambers

+44 (0)20 3681 2525

PIERER Mobility is a research client of Edison Investment Research Limited

Faced with an unprecedented set of global circumstances arising from the coronavirus pandemic, management has taken pre-emptive action with respect to potential supply chain issues. Of course, demand effects are more difficult to predict. The good news is that Stefan Pierer, the CEO, can apply his experience from managing the financial crisis, when the group saw volumes fall by around 25–30%. Any forward-looking estimates need monitoring, but we are cutting our volume expectation across the group by 15%, with a drop-through impact on EBITDA of €45m.

Year end

Revenue* (€m)

EBIT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

1,462

128.7

1.82

0.30

14.8

1.1

12/19

1,520

132.0

2.42

0.30

11.2

1.1

12/20e

1,431

72.8

1.01

0.30

26.7

1.1

12/21e

1,698

132.3

2.07

0.30

13.0

1.1

Note: *Revenues, EBIT and EPS are continuing business, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY19 preliminary figures

Early production break in Europe

In anticipation of potential supply chain disruption, emanating mainly from northern Italy, the company has decided to suspend production at its main Mattighofen facility in Austria for two weeks, pulling forward the usual summer break. Management indicates that it has manufactured sufficient stock to keep demand satisfied across its global dealer network and we expect it to build component stocks as a temporary buffer during this period. In India, the production at joint venture partner Bajaj Auto currently proceeds as normal.

Reducing our forecast for FY20

While the moves are not expected to affect the availability of product to the global dealership network, markets are likely to be at least temporarily depressed by the lockdown measures currently underway around the world. The overall medium- to long-term macroeconomic detriment to motorcycle demand is difficult to assess at present. Our assumption is that if the virus fades over the summer, then a v-shaped recovery is possible in FY21. In the meantime, we are assuming a 15% volume decline in the core business for FY20, with a 14% impact on revenues and a 16% or €76m drop in gross profit. We assume some saving in operating expenses from reduced marketing, travel, lower numbers of agency workers and other overhead controls. The resultant cut of €45m in EBITDA (-18%) drops directly into EBIT and PBT, although it is mitigated at the EPS level by the minority share. Of course, things may deteriorate further, requiring deeper rationalisation of fixed costs.

Valuation: Not rated for a recovery

The share price has halved in the face of the pandemic, and a P/E rating of just 13.0x in FY21e is discounting a far worse demand environment than we are currently assuming. If conditions normalise in the next few months, the rating is not reflecting a likely recovery in demand and profitability in FY21. It also fails to reflect expected medium-term growth from the entry into urban e-mobility markets.

Proactive measures

In the face of the global pandemic, PIERER Mobility last week announced a two-week production halt at its main facility in Austria. It was seen as a pre-emptive strike to avoid supply chain shortages from northern Italian suppliers as restrictions increased. Management says it has sufficient inventory to meet demand in its dealership network to facilitate pulling forward the normal summer break, and has also built component inventory buffers to allow production to proceed normally once the break is over. However, with many main markets in lockdown in Europe and North America, it seems likely that further production stoppages may be required over the next several months. At present, the Indian production is proceeding normally, but all operations are vulnerable to demand reductions

In the year to August 2009, the lowest point of the cycle, KTM Power Sports accounts show that revenues fell by 25% or just over €150m on the prior year to €454m, and EBITDA dropped by €11m to €39.5m from €50.4m. Management responded by cutting costs and restructuring, including a temporary cut in the workforce of 26%. Demand, sales and earnings started to recover from 2010.

Earnings revisions

Management has cancelled guidance. We are making an assumption that the impact on demand will be severe for a short period, and now assume sales volumes in the core business will be down 15% in FY20, although this needs to be monitored depending on how the pandemic develops, especially measures to counter it. To a degree, we are trying to show an element of sensitivity of financials to a downturn, of which PIERER management has previous experience from the financial crisis in 2008/09.

It should be noted that the structural changes of adding GASGAS motorbike sales and e-bikes initial consolidation partially mitigate the year-on-year impact on revenues

Exhibit 1: PIERER Mobility earnings estimates revisions

Year to Dec

2020e

2021e

€m

Prior

New

Change

Prior

New

Change

Core Motorcycle business

1558.1

1330.8

-14.6%

1636.7

1577.8

-3.6%

E-motorcycles

0.0

0.0

0.0

0.0

E-bikes

100.0

100.0

0.0%

120.0

120.0

0.0%

Total revenues

1658.1

1430.8

-13.7%

1756.7

1697.8

-3.4%

Core Motorcycle business

463.4

387.1

-16.5%

484.4

460.9

-4.9%

E-motorcycles

0.0

0.0

0.0

0.0

E-bikes (PEXCO)

15.0

15.0

0.0%

21.6

21.6

0.0%

Total gross profit

478.4

402.1

-15.9%

506.0

482.5

-4.6%

Operating expenses

233.4

202.0

-13.5%

226.6

212.4

-6.2%

EBITDA

245.0

200.1

-18.3%

279.5

270.1

-3.4%

D&A

-129.5

-127.2

-1.8%

-137.4

-137.8

0.3%

EBIT

115.5

72.8

-36.9%

142.1

132.3

-6.9%

PBT

100.0

57.3

-42.6%

128.2

118.1

-7.8%

Net Income

39.5

22.7

-42.6%

50.7

46.7

-7.8%

EPS (€)

1.75

1.01

-42.6%

2.25

2.07

-7.8%

Dividend (€)

0.30

0.30

0.0%

0.3

0.30

0.0%

Adjusted net debt

378

385

2.0%

324

368

13.7%

Source: Edison Investment Research estimates

In terms of cost of goods sold (COGS), the company is able to reduce the number of temporary staff, which should help to alleviate some of the fixed cost nature of production staff, which account for approximately 11% of COGS. The materials bill and purchased services account for around 85% of COGS, which should vary with production volumes and these should fall. However, we note that management says it has built near-term component buffer stocks to mitigate any supply shortages that may emerge, and these would need to be worked off during the remainder of 2020. The remainder is largely depreciation of property, plant and equipment and amortisation of capitalised development costs.

In the overhead, we expect marketing costs to fall and, with the sporting calendar curtailed, racing budgets should also decline. R&D investment is likely to be maintained. Administrative cost may be relatively more fixed, although there may be some agency workers who can be flexed.

Assuming the pandemic is controlled by 2021, we would expect a recovery. The overall financial impact on the global economy is hard to predict at present, but will be negative. Our assumption includes a view that some sales are deferred from 2020 to 2021. We assume the move into urban e-mobility markets through e-bikes and eventually e-motorcycles continues as expected, and near break-even for e-bikes operating performance in FY20.

Exhibit 2: Financial summary

Accounts: IFRS, year-end: December, €m

 

 

2017

2018

2019

2020e

2021e

2022e

INCOME STATEMENT

 

 

 

 

 

 

 

 

Total revenues

 

 

1,354

1,462

1,520

1,431

1,698

1,872

Cost of sales

 

 

(945)

(1,029)

(1,066)

(1,029)

(1,215)

(1,338)

Gross profit

 

 

409

433

454

402

482

534

SG&A (expenses)

 

 

(128)

(166)

(150)

(136)

(143)

(155)

R&D costs

 

 

(34)

(27)

(33)

(35)

(36)

(38)

Other income/(expense)

 

 

(28)

(29)

(30)

(31)

(33)

(34)

Depreciation and amortisation

 

 

(97)

(82)

(109)

(127)

(138)

(144)

Reported EBIT

 

 

122

129

132

73

132

163

Finance income/(expense)

 

 

(11)

(15)

(13)

(15)

(14)

(13)

Other income/(expense)

 

 

(2)

(1)

(1)

(1)

0

0

Reported PBT

 

 

109

112

118

57

118

149

Income tax expense

 

 

(30)

(27)

(22)

(14)

(28)

(36)

Minorities

 

 

(39)

(44)

(41)

(21)

(43)

(55)

Reported net income (post-minorities)

 

 

40

41

54

23

47

59

Basic average number of shares, m

 

 

225

23

23

23

23

23

Basic EPS (€)

 

 

1.98

2.99

2.42

1.01

2.07

2.62

Dividend per share (€)

 

 

0.30

0.30

0.30

0.30

0.30

0.35

Adjusted EBITDA

 

 

219

211

241

200

270

307

Adjusted EBIT

 

 

122

129

132

73

132

163

Adjusted PBT

 

 

109

112

118

57

118

149

Adjusted EPS (€)

 

 

1.77

1.82

2.42

1.01

2.07

2.62

Adjusted diluted EPS (€)

 

 

1.77

1.82

2.42

1.01

2.07

2.62

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

357

283

380

413

435

451

Goodwill

 

 

117

96

146

146

146

146

Intangible assets

 

 

280

327

345

345

345

345

Other non-current assets

 

 

28

39

17

17

17

17

Total non-current assets

 

 

782

745

888

921

943

959

Cash and equivalents

 

 

169

89

161

151

149

192

Inventories

 

 

297

287

324

313

351

367

Trade and other receivables

 

 

216

220

235

226

253

271

Other current assets

 

 

1

13

8

8

8

8

Total current assets

 

 

683

609

728

698

761

838

Non-current loans and borrowings

 

 

373

339

477

457

437

417

Other non-current liabilities

 

 

89

95

110

110

110

110

Total non-current liabilities

 

 

461

435

587

567

547

527

Trade and other payables

 

 

178

191

205

198

234

257

Current loans and borrowings

 

 

171

73

80

80

80

80

Other current liabilities

 

 

125

104

116

116

116

116

Total current liabilities

 

 

475

368

401

394

430

453

Equity attributable to company

 

 

318

297

334

343

369

403

Non-controlling interest

 

 

211

253

295

316

359

414

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Profit for the year

 

 

84

114

96

44

90

114

Taxation expenses

 

 

33

29

22

14

28

36

Net finance expenses

 

 

4

(16)

(16)

16

14

13

Depreciation and amortisation

 

 

86

91

109

127

138

144

Movements in working capital

 

 

(23)

(83)

70

13

(30)

(10)

Interest paid / received

 

 

(13)

(15)

(12)

(16)

(14)

(13)

Income taxes paid

 

 

(10)

(36)

(10)

(14)

(28)

(36)

Cash from operations (CFO)

 

 

161

85

258

184

198

248

Capex

 

 

(182)

(167)

(165)

(160)

(160)

(160)

Acquisitions & disposals net

 

 

28

70

0

0

0

0

Other investing activities

 

 

0

(6)

(1)

0

0

0

Cash used in investing activities (CFIA)

 

 

(154)

(102)

(166)

(160)

(160)

(160)

Movements in debt

 

 

(96)

(38)

0

(20)

(20)

(20)

Dividends paid

 

 

(20)

(19)

(20)

(14)

(21)

(25)

Other financing activities

 

 

(2)

(6)

(1)

0

0

0

Cash from financing activities (CFF)

 

 

(118)

(63)

(21)

(34)

(41)

(45)

Currency translation differences and other

 

 

(4)

0

0

0

0

0

Increase/(decrease) in cash and equivalents

 

 

(115)

(80)

72

(10)

(3)

43

Cash and equivalents at end of period

 

 

169

89

161

151

149

192

Net (debt)/cash

 

 

(375)

(323)

(396)

(385)

(368)

(305)

Movement in net (debt)/cash over period

 

 

(375)

52

(73)

10

17

63

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by PIERER Mobility and prepared and issued by Edison, in consideration of a fee payable by PIERER Mobility. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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New York +1 646 653 7026

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by PIERER Mobility and prepared and issued by Edison, in consideration of a fee payable by PIERER Mobility. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

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Research: Metals & Mining

Endeavour Mining — Q419 and FY19 results ahead of expectations

Fourth quarter adjusted EPS at Endeavour of US$0.336 was materially ahead of both our (US$0.188) and consensus (US$0.21–0.27) forecasts, despite all operations being affected by an extension of the traditional Q3 rainy season into Q4. The positive performance was driven by a close control of all-in sustaining costs (AISC), which were US$819/oz for the quarter (cf our forecast of US$884/oz and a consensus of US$869/oz). Production (which was already known) was exactly in line with our prior expectations, albeit it was better at Houndé and Agbaou and worse at Karma. We have now updated our forecasts to reflect FY20 guidance and (in the aftermath of the recent turbulence) a lower gold price. Although this has entailed a reduction in our FY20 estimates – in part owing to a continuation of higher total cash costs for longer – they are nevertheless inherently conservative in their assumptions surrounding Kari Pump (see page 6) and remain materially higher than FY19, reflecting Endeavour’s evolution from a cash consumer to a cash generator.

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