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Expectation Management

06 March 2019 by jbchevrel

Schaeffler (SHAEFF) is among worst performing names in the Xover today, wider by c10bp (c20bp intra day) while the index is wider ‘only’ by c6bp. This is after a weak release of results. On the financial data side, 2018 results and 2019 guidance (revenue growth 1-3% vs 3% exp.) missed the estimates, and the 2020 guidance dropped (which was kind of expected). That miss comes despite the company had issued 2 profit warnings in 2018. The miss is mainly driven by the Automotive division, as opposed to the Industrial one, and it weakens credit metrics. With net debt at €2.5bn, net leverage now stands at 1.2x (up from 1.0x in 2017). Additionally. On the bond supply side, SHAEFF announced it plans to issue bonds based on 2018 results and depending on market conditions. Speaking of market conditions, it is somehow surprising that SHAEFF paces up issuance, now that ECB APP net purchases are behind us. Those will add to the c€2bn outstanding, maturing between 2020 and 2025.