Why the stock market punishes Bullion If the company has done the homework? This is the question that Vicente Garrido, its president, asks himself before the stock market shock that the company suffered at the end of 2018. A question without answer for him. "I've never understood How the stock works. What I do know is that the company modernizes and increases its profits and the market punishes it for what Donald Trump says, for the Brexit or for the statements of the Minister of Ecological Transition, Teresa Ribera, about the few days that diesel has "
Lingotes Especiales, a Valladolid company specialized in metal casting and machining and assembly of automotive components -especially brake discs and drums-, through its subsidiary Frenos y Conjuntos, has seen how the trade war between the United States and China, the cooling of the global economy, the drop in car sales and the new European emission standardization standards have taken a particular toll. With half a century of history, it has lived several ups and downs in the parquet, where it has been quoted since 1989.
Garrido says that last year they will close it with a billing of about 120 million euros. The latest published data for the third quarter, put the turnover at 88.82 million, representing an increase of 17% over 2017, of which 59.88 million were sales abroad (70% of the total) , with an increase of 18%.Its reference countries are Germany, France, Italy and the United Kingdom, but they have opened new markets in Romania, Turkey or Brazil. EBITDA was also positive at 14.2 million, with a growth of 22% over the third quarter of 2017. The gross profit was 10.12 million, up 26%.
In his client portfolio are Renault, Ford, Citroën, Peugeot and Audi, among others, "with which we have contracts in force, at the moment, until 2021. 12% of the cars that circulate in Europe and 3% in the The world uses pieces of ingots ", adds Garrido.
With these wicks, "it was paradoxical to see how after the presentation of results on October 27, Lingotes began to fall on the stock market." The value dismissed the year at 11 euros, while in May had almost touched the 21. A closing that meant a market capitalization of 110 million euros compared to 178 million with which ended 2017. This year the value has partially recovered, up to 14 euros per share.
In addition to positive results, Ingots has made an aggressive investment policy. During 2016 and 2017, it spent more than 13 million to modernize its mechanization and smelting lines and improve productivity. In 2018 it invested four million in order to increase production capacity in brake discs, its flagship product.
Figures that have served to reduce costs with a greater manufacture of parts mechanized (ready for the final assembly), with more added value and lighter, which are the engine of growth of the company, and which represent 45% of production, against the gross (pieces that the client finishes designing in their facilities).
Project in India
A little more than two years ago, Ingots launched a foundry and machining production plant in India through a joint venture with the local group Setco Automotive. With a total investment of 30 million euros, Special Ingots contributed just 800,000. A conservative bet, which only supplies the Indian market and has a production of 18,000 tons compared to the 100,000 produced in Valladolid.
Garrido also tells what could have been his flagship project in the United States, but that at the moment he is paralyzed as a result of President Trump's trade and tariff measures. "The investment in a factory, 100% owned by Ingots, which would have reached eight million euros to produce mechanized parts. We do not know what the future will bring, but now is not the time. "
These projects "have not translated into a rebound of indebtedness, which is estimated at 0.7 times the EBITDA in 2018, or a lower shareholder remuneration, with a dividend yield that will close this year around 4.6%. . But the fear extends to companies that have made large investments, just when they change legislation and has not given them time to amortize them. Also the profit warning (reduction of the forecasts of results) launched by Audi, Daimler or Valeo provoke indiscriminate punishments ", explains Esther Gutiérrez, analyst of Bankinter.
Despite this scenario, Garrido expresses his optimism. "If the industry fell, a small company like Ingots would have more flexibility to adapt to the changes. We could diversify production in other sectors that we now maintain at low levels, such as pieces for submarine cables or agricultural machinery. We would pull forward. "
According to a report by Light House (independent analysts for companies without hedging on the stock market), published on November 22, there are several risks that could have a negative impact on their results. The analysis cites the possible loss of market share, the appearance of new emission protocols or a 10% rise in the cost of raw materials. But according to his conclusions, although Ingots faces a "possible cyclical deceleration, its positive balance and competitive position will, predictably, maintain its profitability gap with the sector".
Iván Martín, investment director of Magallanes Value, the main investment manager of the shares of Ingots, says: "Not even the arrival of the electric car will have an impact on Bullion. Its products, such as discs and brake drums or clutch plates, not only will continue to be necessary in this type of cars, but also open an opportunity, since the greater weight of these cars requires lighter parts, such as those produced "
From Sernauto, the employer of automotive components, its director, José Portilla, explains: "What happened in recent months around diesel is affecting the sector as a whole. For this reason, we have asked Public Administrations for their contribution to a transition in dialogue with the sector, with a concrete plan of measures for the industry, which takes into account environmental, economic and social factors, which avoid endangering thousands of jobs and foreign investments ", he emphasizes.