Klöckner Pentaplast - comment

Tetrapack and Amcor veteran Michael Zacka is the new interim CEO and looks like a solid choice for Kloeckner. The company is a little smaller than we had forecast (new update on the way shortly), but the cost-cutting has protected EBITDA. From here, the strategy is about sales and winning back clients, and we expect a major pivot. Management reiterated fully year guidance of around €210-215m and Q2 guidance of around €60m (which curiously implies a soft H2). Questions on the implied slowdown were batted away somewhat. The food packaging slowdown was allegedly due to cash-constrained operations, where KP has had to pay suppliers cash in advance. Customers’ low switching costs were felt immediately, but management think they can win back the business now that funding has normalised. PHD, by contrast, saw volumes grow 13%, which directly translated to EBITDA. The company continues to work on attracting a new €100m RCF and is aiming for incremental wins in reducing factoring reserves and raising its credit insurance profile. Liquidity continued strong at €221m (all in cash), and the company is producing positive net cash flow. Once the RCF is in place, management said it may use the liquidity to buy back bonds at a discount.