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Chargeurs

CR
Bloomberg   CRI FP
Support Services  /  France  Web Site   |   Investors Relation
From an industrialist to a luxury player
Target
Upside 36.3%
Price (€) 10.36
Market Cap (€M) 258
Perf. 1W: 1.77%
Perf. 1M: -12.9%
Perf. 3M: -7.83%
Perf Ytd: -11.3%
10 day relative perf. to stoxx600: 8.45%
20 day relative perf. to stoxx600: -13.2%
Earnings/sales releases01/09/2013 11:30

Corner turned?

Fact

Chargeurs has more than doubled its H1 13 bottom line at €3.2m from an admittedly extra low 2012 base (€1.2m). The good news is that its EBIT is up at €9m (vs. €8.1m), achieved in a context of a recession hitting already quite competitive industries (textile and chemicals mostly). The mid-2012 management decision to contract its exposure to bank financing at a rapid clip has been met by another sharp reduction in net debt from c.€32.8m by December 2012 to €16.7m. This is an achievement and hopefully frees Chargeurs for its near-term investment projects.


Analysis

The solid group EBIT at €9.0m combines continuing strength from the Protective Films division, a world leader in its business, with continuing pains from the Textile interlining business. The €43.1m drop in revenues to €240m is primarily due to the Wool business which reduced its scope of consolidation over H2 12 and endured another sharp drop in volume. With the benefit of hindsight, the retrenchment to the less capital intensive part of the Wool value chain has been a wise choice and one central to the ability to defend the balance sheet of the group.
On the Interlining front, eroding sales reflect not only difficult markets but also the decision to prune the client base from weaker clients effectively hooked on supplier credit. This has an acceptable cost in terms of EBIT margin (down to 3.6% from 3.7%) but mostly has benefits from the point of view of defending the balance sheet. Visibility remains pretty low due to very short order books. H2 would have started on a better footing though.
The group’s heart in the current recession is Protective Films which, even though it is substantially Europe-centred, has managed to increase its sales by 4.6% most notably in … Italy (market share gains through innovative products) and expand its EBIT margins (5.0% vs. 4.6%). This division has high ambitions as it intends to spend more on R&D.
The Wool business’s sharp volume contraction has had a reasonably well-managed impact on the division’s EBIT, down to €1.4m from €3.1m.

In addition to a rather decent EBIT achievement in an adverse context, the management of the balance sheet has been impressive with yet another sharp drop in net debt to €17m from €33m by December 2012 and €81m by December 2011. Good control of working capital and asset disposals helped precipitate the exit from stringent lending conditions. Which is more than welcome. Another c.€5m held as assets for sale will help contract even further the net debt position by the close of this year.


Impact

Management sticks to its conservative estimates for 2013, that is, at least, a doubling of the EBIT to €14m. So are we, as it is clear that what is gained on Protective Films tends to be lowered in Interlining. However, sticking means targeting €17.5m as far as AlphaValue is concerned. The overall sentiment is that Chargeurs should have turned the corner of getting rid of its debt yoke in a difficult year for operations. This suggests that underlying assets are solid and only need a small prop to churn decent results and future earnings growth. This indeed would be a serious change.


Updates

21 Jan 14 Earnings/sales releases
More of the same

25 Nov 13 Other news/comments
Steady going over Q3

01 Sep 13 Earnings/sales releases
Corner turned?

24 Jan 13 Earnings/sales releases
€16m 2012 loss; regaining room for manoeuvre

26 Nov 12 Earnings/sales releases
Resistance of prices, drop in volumes

03 Oct 12 Earnings/sales releases
Worsening context weighs on profitability

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