Renta4 | We forecast that the weakness in packaging which has been seen all year will continue, despite the better performance than last year, especially in Europe and Asia (substitution effect) and with African swine fever in China as the main focus of uncertainty for the following quarters.
Organic growth of 3.6% (ex-exchange rate) for 3Q19 is explained by a slight recovery in volume, the price increase policy and the change of perimeter. As for cogeneration, we expect incomes of 12 M€. So incomes for the first nine months of 2019 would reach 614 M€ (+6% yoy), which corresponds to fulfilling ~75% of our forecast for the whole year and the median point of the guidance offered by the company (growth +5%/+7% post profit warning, +6%/+8% before).
We expect an increase of +8% yoy in recurrent Ebitda (practically stable compared to 2Q19) to 48 M€, with the margin increasing +26 bp to 23.5% (a tenth less than 2Q19). Thus recurrent Ebitda for the first nine months of 2019 would be 143 M€ (+2% yoy), equivalent to 70-75% of out forecast for the whole of 2019 and the median point of the guidance (growth +2%/+5% post profit warning vs +10%/+13% before).
We recall that coinciding with the first half results for 2019 and due to a more adverse market environment than initially expected and the greater competitive pressure in South East Asia and Europe, the company revised downwards its 2019 guidance. In the short term the quarterly results and 2020 guidance will be important for calibrating the impact of swine fever on volumes and margins. We positively value the positioning of Viscofan (sector leadership, multi-technology focus, solid balance sheet), but the lack of visibility about the current food crisis (pork prices in China +69%) yoy in September make us adopt a more cautious posture until identifying signs of recovery.