(Boursier.com) — Another week of high volatility on the financial markets! More resilient than Wall Street, the CAC40 limits its decline to 1.2% over five sessions, to 6,285 points this Friday evening. The announcement by the People’s Bank of China of a 15 basis point cut in one of its main key rates, a new measure to stimulate the world’s second largest economy, has brought a little balm to the heart investors, who are still very worried about a potential marked slowdown in the economy, or even a recession against a backdrop of soaring prices…
In this environment, the rapid rise in the interest rates of the major central banks remains the major subject of concern at the moment. US Federal Reserve Chairman Jerome Powell said this week that the Fed will continue to tighten monetary conditions until inflation shows clear signs of easing, but still believes there is room to land the US economy “almost smoothly”, rather than causing a recession. The head of the Fed thus affirmed, on the occasion of a conference organized by the ‘Wall Street Journal’, that the Fed’s plan was to raise its key rates in steps of half a point at its next meetings. However, he did not rule out making larger increases, by 0.75 pts if necessary…
A sign that the inflationary context, exacerbated by the war in Ukraine and its multiple consequences, is beginning to affect the real economy, several big names in American distribution have warned that their margins will suffer due to soaring costs: Walmart and Target to name a few. In France, Orpea stalled while a new scandal (financial this time) hovers over the specialist in Ephad. Conversely, Société Générale was boosted by the announcement of its exit from Russia, while Engie saw its results jump with the surge in energy prices.
In the currency market, the euro regained some ground against the greenback, at $1.05 between banks on Friday evening, while Bitcoin was again moving above $30,000 on Coindesk. Finally, on the black gold market, WTI and Brent are trading above $112.
VALUES
* Vallourec gained 13% after the publication of results in sharp decline in the first quarter and the announcement of a new vast restructuring. Over the first three months of the year, the seamless tube specialist generated gross operating income of 45 million euros, down 44% year-on-year, negatively impacted by the suspension of the iron mine in Brazil, for revenues of 916 ME (+30%). As part of the rationalization of the group’s structure, Vallourec will cut around 2,950 jobs (out of more than 17,000 positions worldwide), close certain factories in Germany, France and the United Kingdom, and transfer part of its production in Brazil to accelerate future earnings growth. “These decisions should allow Vallourec to remain profitable, whatever the market conditions,” said Philippe Guillemot, appointed CEO last March.
* Air France-KLM soars by 11%. Following the announcement, during the presentation of the 2021 annual results, of the second stage of the measures to strengthen its equity, the carrier indicated that it was in exclusive discussions with the investment fund Apollo Global Management with a view to an injection of 500 million euros in the capital of an Air France spare engine subsidiary. The proceeds of the transaction will allow it to partially repay the aid from the French State and reduce the cost of its debt. “The structure will not result in any changes operationally and socially,” the group said, adding that the transaction will have no impact on the contracts of its employees.
*Engie also soared by 11%, driven by the increase in its 2022 objectives. The energy group now anticipates for the current financial year a net recurring result, Group share, of between 3.8 and 4.4 billion euros (compared to a previous forecast of 3.1 to 3.3 billion euros), based on an indicative EBITDA range of 11.7 to 12.7 billion euros (against 10.7 to 11.1 billion euros) and an EBIT ranging from 7 to 8 billion euros (vs. 6.1 to 6.5 billion euros). The leading gas supplier in France has also indicated that it has reached an agreement with Gazprom on a mechanism, currently being put in place, allowing it to meet its payment obligations for Russian gas – while Moscow now requires that -this is ultimately carried out in rubles -, while avoiding currency risk. In the first quarter, Engie, which fully benefited from the surge in energy prices, generated Ebit of 3.5 billion euros, up 74% and 76.4% organically, for revenues of 25.6 billion euros (+85% and +84.4% on an organic basis).
* Ubisoft climbs 8%. The title has benefited in recent days from a rating from SocGen, which has raised its recommendation on the file to ‘buy’, targeting 55.3 euros, but also from the announcement of the release of its ‘free’ game. -to-play’ ‘Roller Champions’ on May 25th. SocGen analyst Richard-Maxime Beaudoux (‘purchase’) expects Ubisoft to unveil several ‘free-to-play’ titles in fiscal 2023 across all platforms, although the ‘we don’t know yet which games will be launched.
* GTT gained 8%, boosted by new orders. The group was notably chosen by its partner, the Korean shipyard Hyundai Heavy Industries, to design the cryogenic tanks for six container ships powered by Liquefied Natural Gas (LNG).
* Valeo and Faurecia take back 5%. Citi (‘neutral’) said Valeo management had confirmed auto production bottomed in April and activity was improving in May. Referring to an online meeting with the group’s chief financial officer, Robert Charvier, the bank noted that the main factors that have weighed on production are showing signs of slowing: the situation in China is improving; Russia/Ukraine war bottlenecks are easing and semiconductor shortages are also showing signs of recovery.
* Societe Generale 5% advance. La Banque de la Défense was supported by a note from KBW which raised its recommendation on the file to ‘outperform’ by targeting 32.5 euros. The completion of the sale of Rosbank and insurance subsidiaries in Russia should be a “welcome relief”, according to the analyst. This operation will allow the group to focus again on its core activities, the dynamics of the world markets continuing and the risks of cost inflation being controlled. Several strategic milestones are yet to be achieved in 2022, but execution has been good so far and so there is little reason to fear that the achievement of these targets will be in jeopardy, the broker adds.
Conversely, * Orpea drop of almost 30%. After the huge outcry caused by the release of journalist Victor Castanet’s investigative book accusing Orpea of acts of negligence and restrictions on the residents of its establishments, a second scandal hovers over the addiction care specialist . A survey conducted by ‘Mediapart’ and ‘Investigate Europe’ reveals that the group has relied on an unknown Luxembourg holding company to develop in Europe, while avoiding taxes in Italy. Reacting to this information, Orpea evokes “actions which were previously denounced by the company to the Nanterre public prosecutor’s office in its complaint against X, the filing of which was communicated to the market on May 2, 2022. This complaint is the result of investigations which revealed a certain number of frauds of which the company or its subsidiaries may have been victims. The company does not identify, as it stands, any material negative impact, following the actions thus denounced, on its cash or its real estate assets It will implement all the means in its possession to recover the sums of which it would have been deprived because of these actions.
* Derichebourg stumbles 13%. 24 hours after having expressed its desire to take part in the tour de table ofElior at 19.6%, Derichebourg declared to the AMF that it crossed upwards, on May 18, the thresholds of 5%, 10% and 15% of Elior’s capital and voting rights and held 33,770,218 shares, representing as many voting rights, i.e. 19.58% of the capital and voting rights of this company. In the same letter, the business and environmental services group explains that it plans to increase its stake in Elior depending on market conditions and opportunities, without however reaching 30% of the capital or voting rights. He therefore does not plan to take control of the company and emphasizes that his investment demonstrates Derichebourg’s confidence in Elior’s development capacity and its desire to support the latter’s strategy both in collective catering and in business services. Among analysts, this operation leaves quite perplexed. For Oddo BHF, this deal appears very surprising, for example, both in its timing (what is the urgency for Derichebourg?) and in its terms.
* Crossroads yields 9% with Casino (-5%), penalized by the publications of the two American giants walmart and Target, which announced one after the other results below market expectations, weighed down by soaring inflation. Other smaller US retailers have also lowered their forecasts due to sharply rising costs.
* Seb dropped 6% as Oddo BHF downgraded the stock to ‘neutral’ with a target lowered from 159 to 134 euros. While the stock may seem “Value” (EV/ROC 2022e: 10.9x, FCF yield above 6%) with excellent medium-term fundamentals (very healthy balance sheet structure, ability to make acquisitions), the exogenous shock of the slowdown in China (25% of consumer sales), uncertainties about consumption and the strong seasonality of results (35% of annual Ropa is achieved in Q4) induce a risk on annual objectives. In this context, it may seem difficult for Seb to outperform in the short term…