Adler Pelzer - comment

Adler Pelzer bonds have been unshortable for a long time, and now that the company is in intense discussions over its A&E, we don’t presume the bonds will move on what we consider an on-target result with a slightly alarming weakness in Asia. Management flag a €23m FX headwind on revenues from Asia and NAFTA. Safe for Asia, revenues were spot on (NAFTA would have been better on a currency adjusted basis), as were margins. EBITDA came in spot on, but the company paid a little less tax, spent €10m less on WC outflow than expected and did €13m better on FX adjustments on their financing arrangements than last year (which we had not adjusted for). Capex and other items are again as expected, so that the net effect is a €22m better cashflow than we had modelled. Still, we are more worried about Asia and continued FX headwinds than we are relieved by temporary WC management. We understand the shareholders are offering cash to get the A&E done, but rumours have been a moving target, and it's clearly taking a little longer.