Pasubio - comment

Pasubio’s P&L came in line with our expectations, while cash flow exceeded our forecasts for many factors. Importantly, the core rationale for our short position, continued underperformance in the automotive segment, remains intact. As such, while the bond may trade modestly higher this morning, we intend to maintain our short position.

Q1 results were exactly in line with our projections at the P&L level, with the consolidation of recent fashion segment acquisitions offsetting ongoing weakness in automotive. Adjusted EBITDA was also in line, although this masked lower-than-expected gross profit and personnel costs relative to our model. Overall, the earnings outcome was as expected. Cash flow, however, surprised positively, driven by a €14m outperformance in working capital. Management attributed this to timing effects and reiterated that working capital requirements typically rise in Q1 and Q3. Given the likelihood of a reversal in Q2, we do not plan to adjust our model at this stage. We also overestimated tax and capex, which we aim to clarify on today’s call.