Her Eleftherias Kourtali
Mytilineos’s very strong first quarter results are expected to be recognized by the market and “seen” on the stock market, while they will also lead to upgrades to profitability for the whole of 2022 by analysts, as noted by Citigroup, and thus maintain the Buy recommendation and the target price of 22 euros, while placing the dividend yield this year at 4.2%.
More specifically, as Citi notes, Mytilineos’s first-quarter results were strong with EBITDA at € 130 million, up 13% on a quarterly basis and 6% higher than market estimates. Revenue for the quarter doubled on an annual basis, while earnings per share (EPS) increased by 83%, broadly confirming Citi’s view of the possibility of almost doubling earnings throughout 2022.
Aluminum companies achieved the strongest profit dynamics with a 37% increase on a quarterly basis in EBITDA, while electricity companies were able to maintain a high level of profitability for the second consecutive quarter.
Net debt at € 914 million was higher than Citi’s expectations, indicating accelerated spending on capital and working capital outflows.
“Overall, while profits continued their strong momentum, further growth in the aluminum industry and the delivery of growth plans will be the key drivers for stronger profits for the entire year 2022,” Citi said.
Activities in the aluminum industry exceed expectations
EBITDA in the metallurgical sector, at 55 million euros, increased by 37% on a quarterly basis, notes Citi. This is mainly due to the benefit of higher LME prices and natural premiums, offsetting cost pressures, especially from higher gas prices for alumina production. It is noted that the average selling price of aluminum for Mytilineos is likely to continue to rise throughout the year (due to its time lag) and is a key headwind for Citi’s expectations for stronger profits. Alumina and aluminum production was marginally below expectations, indicating a drop of 4-8% compared to the previous quarter.
Stronger gains in the electricity sector will alleviate market concerns
Stronger electricity generation, higher revenues and a stable EBITDA compared to the last quarter of the energy sector positively reflect Mytilineos’ ability to continue operating smoothly and efficiently, Citi said. The company seems to have taken full advantage of the increased electricity prices in the spot market, while there are no significant negative effects on the cost structure either. The commissioning of the new CCGT with doubling capacity is a key catalyst for profits to remain strong in the second half of 2022.
The catalyst is RSD
The profit dynamics of the Renewable Sources & Energy Storage (RSD) Development Sector continues with stronger revenues, while the margins improved further to 10% compared to 6% in the last quarter. The company has signed projects in the United Kingdom with a total capacity of 100 MW, while securing a 15-year contract for 25 MW projects in Italy at an attractive price, is one of the key points of the quarter. The contracted balance (signed outstanding) is set at € 214 million, while an additional € 69 million are being traded. With an EBITDA rate of the first quarter of 2022, the sector could offer a more than doubling of EBITDA compared to last year, according to Citi estimates. In addition, the disposal of the projects will help the company to release cash.
Source: Capital
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